1
Draft final report
30 Sept 2016
UNLEASHING THE POTENTIAL
The role of development banks to promote
inclusive business in Asia and Latin America
Report prepared by Dalberg Consult
For the Asian Development Bank
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<ADB to enter>
© 2013 Asian Development Bank and the Inter-American Development Bank
Written by W. Robert de Jongh, the Red Mantra Group.
All rights reserved. Published in 2013.
Printed in the Philippines.
ISBN 978-92-9254-312-9 (Print), 978-92-9254-313-6 (PDF)
PSN RPT136099-3
Cataloging-In-Publication Data
Asian Development Bank and the Inter-American Development Bank.
Working together in pursuit of inclusive business: Sharing the Latin American and Caribbean
experience with Asia and the Pacific
Mandaluyong City, Philippines: Asian Development Bank, 2013.
1. Business. 2. Investment. 3. Latin America 4. Asia
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views and policies of the Asian Development Bank (ADB), the Inter-American Development Bank
(IDB), their Board of Governors, or the governments they represent.
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TABLE OF CONTENT
PREFACE ............................................................................................................................. 5
ABBREVIATIONS ................................................................................................................ 6
1 ALIGNING THE CONCEPT OF INCLUSIVE BUSINESS ................................................ 8
2 THE INCLUSIVE BUSINESS MARKET FROM A DEMAND AND A SUPPLY
PERSPECTIVE ............................................................................................................. 11
2.1
Demand Side ........................................................................................................ 11
2.2
Supply side ........................................................................................................... 12
3 WHAT IS NEEDED TO PROMOTE INCLUSIVE BUSINESSES? ................................. 13
4 ACTORS FOR PROMOTING INCLUSIVE BUSINESSES ............................................ 15
4.1
Development banks and impact investors dominate financing support.................. 16
4.2
Commercial Banks and HNIs are limited by their risk appetite and capital ............ 17
4.3
IB advocates and capacity builders provide financial and non-financial support .... 18
4.4
Regulators and governments are barely active ..................................................... 20
5 FIVE REASONS WHY DEVELOPMENT BANKS SHOULD PROMOTE INCLUSIVE
BUSINESSES ............................................................................................................... 21
5.1
Inclusive Business is a new market opportunity .................................................... 21
5.2
There is money to be made and it is less risky than generally presumed .............. 21
5.3
Strategic alignment on reducing poverty and the role of private sector in it ........... 22
5.4
Development banks bring unique capabilities ....................................................... 23
5.5
Structural disadvantages present learning and development opportunities ........... 25
6 CURRENT IB ENGAGEMENT OF DEVELOPMENT BANKS ....................................... 26
6.1
IDB: The frontrunner in setting up IB as a separate business line ......................... 26
6.2
IFC: The global market leader in Inclusive Business ............................................. 31
6.3
ADB: Quickly catching up with a unique two pronged approach ............................ 37
6.4
Bilateral development banks are willing to set up inclusive business lines ............ 41
6.5 In sum, multi-laterals are leading while bi-laterals are increasingly looking at
partnering ...................................................................................................................... 43
7 RECOMMENDATIONS FOR DEVELOPMENT BANKS TO ACCELERATE THE
INCLUSIVE BUSINESS AGENDA ................................................................................ 45
7.1
Institutionalize inclusive business as a strategic business focus ........................... 45
7.2
Private sector operations team should set up clear targets ................................... 46
7.3
Sovereign operations should take a three pronged approach ............................... 47
4
7.4
Anchor cell should lead knowledge work, partnerships and M&E .......................... 48
8 APPENDIXES ............................................................................................................... 50
8.1
Inclusive Business Definitions of Development Banks .......................................... 51
8.2
Business Call to Action ......................................................................................... 52
8.3
World Business Council for Sustainable Development .......................................... 55
8.4
Inclusive business portfolio of ADB, IDB and IFC .................................................. 58
8.5
Inclusive Business knowledge work of ADB, IDB and IFC..................................... 64
8.6
ADB’s impact assessment tool and Inclusive Business Accreditation system ....... 67
8.7
Literature list ......................................................................................................... 69
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PREFACE
Inclusive growth is increasingly seen as an important pathway to reducing poverty by
development banks. Inclusive growth is sustained growth that creates jobs, draws the
majority of people, and especially the marginalized into the economic and social
mainstream, and continuously reduces poverty and vulnerability. For the poor and low
income population, the private sector is the main provider of decent and productive jobs and
income opportunities, and of relevant and affordable goods and services. Inclusive Business
(IB) is the direct contribution of the private sector to make growth more inclusive. For
society, more inclusive business solutions mean less poverty and better living standards for
the poor. Hence inclusive growth needs more inclusive business investments that provide
solutions for the job and service delivery problems of the poor and low income people.
The Inclusive Business agenda is mainly promoted by bi- and multilateral development
banks and impact investors. The Inter-American Development Bank (IDB), International
Finance Corporation (IFC) and Asian Development Bank (ADB) are the most active
development banks in the inclusive business space. The German Development Bank (KfW)
has also made some investments and its private sector arm (DEG) has a microfinance and
social business portfolio. The French Development Bank (AfD) and its private sector affiliate
PROPARCO have also set up a new social business fund in 2015. Impact investors, with the
dual objective of social and financial returns, are the second biggest supporters of inclusive
businesses.
The development banks work closely with each other and other industry players. The ADB,
IDB, IFC, United Nations Development Programme – Business Call to Action (UNDP-BCtA)
and the World Business Council for Sustainable Development (WBCSD) have a close
cooperation. In June 2015, the multilateral development banks had their first meeting with
bilateral development banks from France (AfD/PROPARCO) Germany (KfW/DEG),
Netherlands (FMO), the European Union (EC Commission/EIB), and UK (CDG) and
established a development bank working group on Inclusive Business.
The ADB, IDB, IFC, UNDP-BCtA and WBCSD are also represented in the advisory council
of the Inclusive Business Action Network (IBAN). IBAN is a knowledge exchange platform on
inclusive business worldwide. IBAN also supported the 2nd Asian IB Forum with co-financing
for five studies, one of them being this report.
The purpose of the study is to clarify what unique role development banks can and should
play in the market in catalysing IB business models. To this end, the study provides an
overview of the inclusive business definitions and markets, assesses the challenges, maps
the support landscape, details the work carried out by development banks and makes
recommendations for development banks. The data for the study was collected through
interviews and desk research. We’ve conducted over 15 interviews with inclusive businesses
and development banks. This study also draws from a significant amount of literature
currently available on Inclusive Business and available Development Finance Institution
(DFI) support mechanisms.
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ABBREVIATIONS
ADB
Asian Development Bank
AfD
Agence Francaise de Developpement (French development agency)
BCtA
Business Call to Action
BoI
Board of Investments
BoP
Base of the Pyramid
CSR
Corporate Social Responsibility
DB
Development Bank
DFI
Development Finance Institution
DFID
Department for International Development (development assistance agency
of the Government of UK)
HNI
High Net-worth Individual
IB
Inclusive Business
IBAN
Inclusive Business Action Network (project of BMZ and GIZ; with ADB, IDB,
IFC, and UNDP in the Board of Directors)
ICT
Information and Communications Technology
IDB
Inter-American Development Bank
IFC
group)
International Finance Corporation (private sector arm of the World Bank
IIC
Inter-American Investment Corporation (at the IDB)
KfW
Kreditanstalt fuer Wiederaufbau (German Development Bank)
M&E
Measurement and Evaluation
MFI
Micro Finance Institution
MIF
Multilateral Investment Fund (of the IDB)
OMJ
Opportunities for the Majority (IB program of IDB)
PPP
Purchasing Power Parity
PROPARCO Société de Promotion et de Participation pour la Coopération Economique
PSOD
Private Sector Operational Department (of the ADB)
SCF
Structured Corporate Finance (at the IDB)
SME
Small and Medium Enterprise
SE
Social Enterprise
TA
Technical Assistance
UK
United Kingdom
7
UNDP
United Nations Development Programme
USD
United States Dollar
WBCSD
World Business Council for Sustainable Development
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1 ALIGNING THE CONCEPT OF INCLUSIVE BUSINESS
1.
Development banks have their own definitions for inclusive business, however,
they have similar approaches. The term ‘inclusive business’ (IB) was first introduced by
the World Business Council for Sustainable Development (WBSCD) in 2005, referring to
‘ventures that go beyond philanthropy by integrating low-income communities into
companies’ value chains as customers, suppliers, retailers, and distributors.1 The IFC
defines an inclusive business as ‘a private sector approach to providing goods, services, and
livelihoods to people at the Base of the Pyramid (BoP). Inclusive businesses are
commercially viable and scalable and make the BoP a part of the value chain of the
company’s core business’.2 The ADB defines an inclusive business as ‘Commercially viable
and bankable3 core business models which provide innovative and systemic solutions for
relevant problems of the poor and low income’.4 (See Annexure 8.1 for definitions by other
institutions). It should be noted that most definitions go beyond traditional philanthropic
engagement with the poor and point towards systemic and sustainable solutions to the
problems of the poor.
2.
BoP refers to the population in the bottom 40-60% of income brackets of a
developing society. The BoP can be bracketed into different segments (see table 1). The
IFC uses the USD 8 poverty line5 globally. By this definition, there are 4.5 billion (~60%)
people that comprise the BoP worldwide, and almost 90% of the population of Asia. Given
the high coverage in Asia, this definition cannot be used, and often USD 4 poverty line is
used.
Table 1: Base of the Pyramid population for the year 2012
BoP
Poor
East Asia and
# Pacific %
1086
53%
147
7%
South Asia
#
%
1461
89%
309
19%
Latin America
#
%
375
62%
34
6%
Note: (1) The unit for figures in # are in millions. (2) The BoP is defined as those with income of less
than USD 8 a day using the 2005 PPP. However for Asia, this is taken as USD 4 a day. This
segment typically comprises the bottom 60% of the income pyramid. (3) Poor is defined as those with
income less than USD 1.25 a day (2) In October 20015 the World Bank changed the PPP estimates.
The USD 1.25 poor translates now to USD 1.9, USD 2 to USD 3.1, USD 4 to USD 6.1, and USD 8 to
USD 12.3)
Source: http://iresearch.worldbank.org/PovcalNet/index.htm?1
3.
Innovation is central to an inclusive business. Inclusive businesses keep the BoP
at the center of the design of their solutions. These businesses do more than just extend
current product lines to the BoP. They often tailor products/services to address problems of
the poor. For example6:

A coffee company in the northern Philippines uses drip irrigation to save water, bar
codes to monitor tree quality, reforestation to reduce land costs, and outsources
WBCSD (2016), “Delivering on the Sustainable Development Goals: The inclusive business approach”
IFC Issue briefs (unknown), “IFC and Inclusive Business Models”
3 Bankable implies a net profit of greater than 10% by ADB definition
4 http://www.inclusivebusinesshub.org/profiles/blogs/the-under-exploited-potential-of-inclusive-business-in-asia
5 This report consistently refers the poverty data based on the 2005 PPP only for consistency
6 Examples sourced from: http://blogs.adb.org/blog/unlock-solutions-poor-inclusive-business-innovations
1
2
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industrial capacities to farmers rather than pure contract farming. It has engaged 20,000
farmers who are earning substantially more than the going market rate.
An Indian company which was established to eliminate cataracts suffered by the elderly,
developed a model allowing thousands of blind poor to be treated for about USD 1 per
operation. This was due to process innovations and cross subsidies from better-off
patients. The company also trained paramedical staff from rural areas with lower
educational qualifications to support surgeons.

4.
Inclusive businesses should not be confused with other approaches that help
the poor. Inclusive business differs from other approaches such as Corporate Social
Responsibility (CSR) and Social Enterprises (SEs) that help the poor. Though often used
interchangeably in some discussions, it is crucial to understand the differences between
inclusive businesses and other concepts, and apply a closer conceptual rigor. Table 2
explains the key conceptual differences.
5.







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Inclusive Businesses differ from7:
The larger concept of inclusive growth, by emphasizing the role of the private
sector to develop business models that directly generate new, well-paid jobs and
relevant affordable services for the poor, rather than public infrastructure or other
investments with trickle down effects for the poor.
Social enterprises, by emphasizing scale of impact, BoP’s relation to the business,
and commercial viability (see table 2 above).
Shared value, by emphasizing systemic business solutions to relevant problems of
the poor
CSR projects, by the nature of business investment (core business versus peripheral
activities) and the lack of financial sustainability of CSR projects.
Philanthropy and angel investments, by expecting commercial returns through
sustainable business cases with clearly articulated social goods for the poor with
direct impact chains.
SME and informal sector work, by emphasizing not only involvement of the poor but
income generating business models where the poor earn more than in traditional
business models of the market competitors.
Traditional contract farming, by establishing business models that include the poor
as suppliers where they earn more than the market rate, by setting up innovations in
the business models that directly not only benefit them but are designed to increase
their income opportunities.
http://www.inclusivebusinesshub.org/profiles/blogs/adb-s-inclusive-business-definition-1
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Table 2: Framework for defining IBs
IB model
IB activity
Financially
viable SE
SE (grant
dependent)
Traditional
CSR
Core
Ancillary
Mixed
Mixed
Ancillary
Yes
Usually local
Mixed
Mixed
No
Yes
Yes
Mixed
Mixed
Usually no
Yes
Yes
Yes
No
No
Reliance on grant. Is the business line
perpetually reliant on grants?
No
Usually no
No
Yes
Yes
Use of profits. What are the net profits
reserved for?
Shareholders
Shareholders
Shareholders
and/or reinvestment
NA (as
negative
EBITDA)
NA (as
negative
EBITDA)
Yes
Yes
Yes (for-profits)
No (non profits)*
No
No
Yes
Usually yes
Usually no
NA
NA
- Manila Water
- Amul butter
- Kernnemer
Food
- Patrimonio
Hoy
- Grameen
Danone
- CocaCola's
Manual
distribution
centers
- BRAC
- Kakao
chocolate
- Yangon
bakehouse
- HUL Project
Shakti
- ITC echaupal
Business model
Business line. Is the business line
central to the commercial viability of the
company?
Social impact
Scale. Is the model scalable?
Solution. Is the solution aimed at the
relevant problem of the poor and better
than alternatives?
Financial viablility
Commercial viability. Is the business
line financially viable now (or in the
future), i.e is the EBITDA non-negative?
Bankability
Return on investment. Can the
company generate return on
investment?
Return expectation. Can the company
meet return expectations of the
investor?
Examples
Organizations/Initiatives
Note: (1) EBITDA also referred to as Operating Margin is Earnings Before Interest, Taxes
Depreciation and Amortization; (2) Net profit is defined as revenue net of operating, interest, capital
and all other expenses; (3) Traditional livelihood implies livelihood through SMEs, informal sector,
contract farming etc.; (4) Return expectation as seen by development banks; (5) *Non-profits can
generate return for debt investments only, provided they have a positive operating margin.
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2 THE INCLUSIVE BUSINESS MARKET
DEMAND AND A SUPPLY PERSPECTIVE
2.1
FROM
A
Demand Side
6.
Developing countries’ aggregated consumption globally is approximately USD
19 trillion a year. Globally, 52% of this consumption expenditure is incurred by lowest and
low income households while 48% is consumed by medium and high income households.
This concentration is much higher for South Asia at 92%, primarily because of the large
percentage of population living in the lowest and low income categories. These information
is presented in Figure 1 below
Figure 1: Developing countries’ aggregate household expenditure by region and income
segment for the year 2010
Lowest and Low
Middle and Higher
54%
46%
East Asia and Pacific
Eastern Europe
and Central Asia
Latin America
and Caribbean
20%
80%
33%
67%
Middle East
and North Africa
71%
South Asia
92%
Sub-Saharan Africa
Developing countries
29%
8%
72%
52%
28%
48%
Note: Lowest segment represents those who live below USD 2.97 per capita a day; low between USD
2.97 and 8.44 per capital a day; middle between USD 8.44 and 23.03 per capita a day; and higher
represents those above USD 23.03 per capita a day using the 2005 PPP.
Source: WRI and IFC Consumption data
7.
The 4.5 billion BoP population in the developing countries present a USD 5
trillion opportunity worldwide for inclusive businesses. The BoP population often has
limited access to quality goods and services, and are employed in the informal economy.
However, collectively they represent a large consumer base (see figure 2 below). Amongst
South Asia, East Asia and the Latin American regions, South Asia has the largest BoP
population as per the USD 8 (2005 Purchasing Power Parity (PPP)) poverty line, followed by
12
East Asia and Latin America. However, East Asia has the highest cumulative expenditure
and Latin America has the highest per capita expenditure.
Figure 2: BoP population and market potential by region for the year 2010
Population under USD 8.44 per capita
a day (million)
Consumption (USD PPP billion)
Grand total
4,525
4,999
South Asia
35.6%
26.5%
East Asia
and Pacific
Sub-Saharan
Africa
10.4%
16.2%
Latin America
and Caribbean
9.8%
6.7%
Middle East and
North Africa
Eastern Europe and
Central Asia
41.5%
34.3%
4.5%
3.5%
7.3%
3.7%
Note: The figure represents data for the lowest (< USD 2.97 per capita a day) and low income
(Between USD 2.97 and 8.44 per capital a day) segments for the year 2010 using the 2005 PPP.
Source: WRI and IFC Consumption data
Figure 3: Distribution of BoP expenditure for the year 2010
Total consumption (USD
billion)
4999
Food and Beverages
47%
1322
2075
490
36%
49%
44%
15%
8%
Housing
10%
Clothing and Footwear
7%
Energy
6%
Transport
6%
Health
5%
Others
20%
11%
7%
6%
6%
6%
7%
6%
10%
8%
5%
4%
6%
5%
24%
20%
East Asia and Pacific
Latin America
and Caribbean
17%
Developing world
South Asia
Note: The figure represents data for the lowest (< USD 2.97 per capita a day) and low income
(between USD 2.97 and 8.44 per capital a day) segments for the year 2010 using the 2005 PPP
Source: WRI and IFC Consumption data
8.
Opportunities exist in diverse sectors. The BoP consumption expenditure is
distributed across many different categories across regions (see figure 3). The food and
13
beverages segment is the biggest consumption category and accounts for 47% in the
developing world. Housing is the second biggest category, accounting for 10% spend in the
developing world. It should be noted that the expenditure on housing is almost 50% higher in
Latin America than in Asia. Expenditure on energy forms the third largest category in South
Asia and Latin America. However, in East Asia, expenditure on clothing and footwear is the
third largest category. In addition, inclusive businesses can also provide goods and services
that are currently not available to the poor.
2.2
Supply side
9.
Only an innovative and robust business model that places the poor at the
center of its operations can successfully capture the demand. While there are huge
opportunities in the BoP market, inclusive business is still a new phenomenon in the region.
High cost of last mile distribution, unfamiliarity of purchasing and living behaviours of the
poor, the large informality of the market and the high perceived risk to invest, government
restrictions, the difficulties of finding an affordable price point while maintaining high
product/service quality for this market segment, and lack of analytical understanding on how
to maximize social impact, are common challenges for inclusive businesses.8 Hence,
innovation is key to overcome these challenges and tap into this market. Inclusive
businesses will have to design new products and services by keeping the poor central to the
process. Further, novel business models with high productivity will have to be deployed.
Traditional approaches of extending product lines will not work. Only this will allow them to
offer these goods and services at a rate competent with the informal sector.
10.
Latin America has a higher incidence of inclusive businesses (as a fraction of
total businesses) as compared to Asia. In Latin America, there are more inclusive
business models and possibilities, given the ease of doing business. South Asia has a
higher number of inclusive businesses than South-East Asia. However in Southeast Asia,
inclusive business investments remain nascent due to reasons such as high risk aversion,
lack of a widespread culture of innovation and leadership, and an environment in which
caring for the poor is done actively by private sector through philanthropy, and/or expected
to be delivered by the government.
3 WHAT IS NEEDED
BUSINESSES?
TO
PROMOTE
INCLUSIVE
11.
Several studies analysed the challenges faced by inclusive businesses and the
nature of support required to overcome those challenges. The framework below summarizes
those challenges and the support (see figure 4).
12.
Concept of inclusive business needs to be well understood. Often, inclusive
businesses are confused with CSR, shared value approaches, social enterprises etc due to
(a) lack of awareness and (b) multiple definitions that are vague and offer no tools for
classification. This often poses multiple hurdles for promotion of inclusive businesses. For
instance, a business leader might consider CSR spend as a means to ‘engage’ with the
poor; a consumer might not associate any incremental value to the goods produced by an
inclusive business; a regulator is unable to create the necessary policies for supporting
inclusive businesses and so on. In cases where basic awareness exists, there are false
8
http://blogs.adb.org/blog/opportunities-investing-inclusive-business-southeast-asia
14
generalizations to dispel, such as inclusive businesses are more risky, and creating impact
implies lowering profitability expectations. Hence, there is a need for large players such as
development banks, business associations, impact investors and other intermediaries to
create and disseminate knowledge about inclusive businesses.
Figure 4: Barriers and the type of support required for inclusive businesses
Stage
Barriers
What is needed to promote IBs?
Lack of
awareness
Concept of IB needs to be well
understood
Lack of interest
Inclusive businesses need internal
champions
Building supply
and demand
Technical assistance to improve project
design and outcomes
Financing
Appropriate financing
Monitoring and
impact
Harmonized impact assessment tools
Unsupportive
policy
Governments and business associations
should play a strong promoting role
Conception
Barriers to
progress in IB
Execution
Source: Adapted from the report on Overcoming the Barriers to Inclusive Business Growth, Business
Call to Action (BCtA) and International Business Leaders Forum
13.
Inclusive businesses need internal champions.9 In order to successfully engage
the BoP in to the core operations of a traditional business, it is important that the business
innovates to create systemic solutions for the relevant problems of the poor and not just limit
Overcoming
the Barriers to Inclusive
Business
Growth, Output
report from December 7, 2010
BCTA and International
bu siness leaders forum
it to extending
the
existing
product/service
toworkshop,
the poor.
Such innovative
models often require
changes in mind-set and the way business is done. It is important that such changes are led
by a passionate internal champion from the senior leadership team. The champion will need
to create commitment, decision autonomy, and provide human and capital resources. In
addition, the champion will also need to overcome organizational lethargy to change and
increase internal awareness on the topic. In absence of a champion, it makes it difficult to
get initiatives off the ground or achieve traction. Hence, private sector advocacy activities, to
nudge business leaders to public commitments, and public recognition to those who drive
change is required.
14.
Technical Assistance (TA) to improve project design and outcomes. Engaging
with the poor often brings unique challenges. Very often, the company lacks information on
the BoP consumer, supply chains to aggregate multiple BoP suppliers are broken,
distribution channels to reach the poor are non-existent and so on. The problem is further
aggravated by a lack of internal expertise on such issues. Hence, launching an inclusive
business model is different from a traditional business model, increasing the cost of
‘experimenting’ in inclusive business activities. Hence, there is a two-fold need for TA. First,
9
Relevant only for traditional businesses switching to inclusive business
15
TA provides grant capital focused on improving the business and/or impact model. And
second, it provides access to sector specialists and a wider network of experts who can help
improve the design of the project/initiative, backed by real insights from the field.
15.
Appropriate financing. In a survey for the G20 Inclusive Business challenge which
asked them to pick all the challenges faced, 90%10 of respondents reported financing as a
major obstacle.11 The problem of accessing capital is existent both internally (whenever
available) and externally. Internally, an inclusive business project/initiative often competes
with traditional projects which conform well to the short term (quarterly/yearly) profitability
metrics and are considered less risky. In addition to these, an inclusive business
project/company, which is not only viable but also bankable, also faces lack of appropriate
capital from external investors (such as commercial banks), i.e. financing for the long term,
collateral free, and in the range of USD 0.5 to 50 million. Hence, investors need to improve
their understanding of the context of the inclusive businesses in order to suit their investment
offering to their requirements.
16.
Harmonize impact assessment tools. Creating impact is central to an inclusive
business. While many claim to be creating systemic impact, only a few are able to provide
systematic and rigorous measurements of the impact created. This is because of two
reasons - (1) Measurement of impact might not be considered as important as ‘doing good’
by the entrepreneur and (2) impact assessment tools are often cumbersome to use and vary
by investor. As a result, impact data reported by inclusive businesses is often based on a
loose framework which is often lacking and non-standardized. For example, an inclusive
business that sources its raw material (for e.g. coffee beans) from the BoP (smallholder
farmers), might only measure the number of suppliers (farmers) in its supply chain and
ignore the improvement in livelihood per farmer. This severely limits their capability to not
only influence stakeholders such as shareholders or government officials but also to raise
funds from impact investors and development banks. Therefore, it is essential to harmonize
impact assessment across the industry.
17.
Governments and business associations should play a strong promoting role.
Governments/state actors can support inclusive businesses in the following ways. Business
associations can also undertake these activities (except for creating supporting policy, which
they can only influence).
1) Create supporting policy, spanning preferential terms for government sourcing,
accessing finance, tax breaks, preferential treatment, purchase agreement etc.
2) Create agencies to gather and disseminate data on the BoP market, viability of
inclusive business models.
3) Financially support inclusive businesses, provide technical assistance and undertake
systematic studies on impact assessment.
4) Improve business environment, i.e. improve ease of doing business and reach of
infrastructure such as road and transportation networks, energy grids etc.
4 ACTORS FOR PROMOTING INCLUSIVE BUSINESSES
18.
Each major actor adopts a unique support strategy in promoting inclusive businesses
across its various stages. Within the ecosystem, funders such as development banks,
foundations, commercial banks, impact investors provide direct investments and
stakeholders such as United Nations Development Programme (UNDP) – Business Call to
10
11
Note that the respondents were given the option to choose multiple challenges.
IFC (2012), “Policy Note on the Business Environment for Inclusive Business Models”
16
Action (BCtA), World Business Council for Sustainable Development (WBCSD), business
associations, and think tanks support inclusive businesses by providing non-financing
support.
4.1 Development banks and impact investors dominate financing
support
19.
Inclusive businesses are recognised as a fast growing, new asset and
investment class. The global impact investment industry has invested more than USD 60
billion12 in inclusive businesses cumulatively. Of these, investments in Southeast and East
Asia sum up to approximately USD 7 billion and USD 12 billion respectively, and at least
USD 4 billion in Latin America. Although the numbers are small compared to the overall
private equity and venture capital industry which has placed over USD 3.8 trillion13 in
investments, the BoP market still offers a large untapped market as mentioned in section
2.1. The influx of investments has led to the recognition of inclusive business as a new
investment class, and increasing its popularity among investors.
20.
Development banks deploy the largest capital amount in inclusive businesses.
In the global impact investment space, development banks have invested approximately
42% of investment monies while fund managers manage 34% as represented in figure 5.
Although this data represents the global impact investment industry, it remains a good proxy
for the distribution of how global impact investors invest in inclusive businesses. Till
December 2015, International Finance Corporation (IFC) has invested more than USD 12
billion, Asian Development Bank (ADB) has invested USD 566 million, and Inter-American
Development Bank (IDB) has invested more than USD 400 million in inclusive businesses.
Figure 5: Funder distribution of the global impact investing space
42%
34%
9%
8%
4%
Development
Finance
Institutions
Fund
Manager
Foundation
Diversified
Others
Financial
Institutions/Banks
3%
Pension Fund
or Insurance
Company
Note: Examples of Diversified Financial Institutions/Banks includes UBS, Royal Bank of Canada, and
JPMorgan Chase
Source: Spotlight on the market 2014 – J.P. Morgan, GIIN
21.
Impact investors have smaller deal sizes. Impact investors on the other hand
invest in smaller deal sizes, usually between USD 0.2 to 5 million. These investments can be
classified under three heads14 – social, environmental and triple bottom line. Social
12
http://blogs.adb.org/blog/clarity-matters-inclusive-business
Preqin (2015), “Preqin Global Private Equity & Venture Capital Report”
14 This classification is adopted by ImpactBase (an initiative of Global Impact Investing Network), which is a
searchable, and online database of impact investment funds.
13
17
investments are those that invest in businesses that improve access to basic services (such
as Education, Health, Housing etc.), and access to finance (for community lending, small
enterprises, microfinance etc). Environmental investments focus on environmental markets
and sustainable real assets (such as carbon commodities, conversation finance etc.) and
cleantech and sustainable consumer products. Triple bottom line investments focus on both
social as well as environmental impact businesses. The deal size varies across these impact
themes - environmental focus investments are 2.8 and 5 times larger than triple bottom line
investment and social focus investments respectively. This large deviation is observed as
environmental focus investments tend to be investments made into real assets. On the other
hand, social focus investments are made by investors for equity stakes.15
22.
Impact investors target a ‘market rate’ of return. In a recent survey, about 60% of
all investors polled (of 158 total), target a risk adjusted market rate of return and 25% target
a return closer to the market rate. 89% of all investors also report that the financial
performance of their portfolio is in-line or out-performing their targets.16 A separate study by
the Global Impact Investing Network based on the performance of 51 funds, found that
“despite a perception among some investors that impact investing necessitates a
concessionary return, the impact investing benchmark has exhibited a strong
performance…”. Furthermore, the study found that the pooled IRR, i.e. net to limited
partners, was 6.9% over the period 1998 – 2010. Of these, those funds that are ‘largely
realized’17, returned a much higher IRR – 15.6% for 7 impact funds launched in the years
1998 – 2001 and 7.6% for 9 impact funds launched in the years 2002 – 2004.18
4.2 Commercial Banks and HNIs are limited by their risk appetite
and capital
23.
Commercial banks are not active in the inclusive business space. Commercial
banks make up less than 8% of total AUM.19 Large national banks such as YES Bank
(India), Habib Bank (Pakistan), Bank of Philippine Islands (The Philippines), Acleda
(Cambodia), Bank Mandiri (Indonesia), ACCIÓN (Latin America), and Itaú Unibanco (Brazil)
through its Itaú Microcrédito, a microfinance and financial literacy arm, have only recently
begun to include inclusive businesses in their portfolios. Similarly, international commercial
banks like J.P. Morgan and Credit Suisse only recently established their own programs to
finance inclusive businesses.20 Hence their overall contributions remain negligible, although
there is growing interest.
24.
High Net-worth Individuals (HNIs) have limited capital to deploy, despite having
a higher risk appetite. As HNIs operate individually, their contributions in the global impact
investing space are spread out thinly. When polled21, fund managers felt that HNIs and
family offices was one of the easier source of funding to access relative to DFIs or
commercial banks. Further, most of the HNIs invest independently. Therefore, if they want to
create systemic impact and reduce investment risks, they need to pool investments. The
Asian Venture Philanthropic Network (AVPN) is one such network. It seeks to improve the
overall impact effectiveness of philanthropy across Asia through the improvement of
financial, human, and intellectual capital between investors and the social sector. Currently,
Impact Base (2015), “ImpactBase Snapshot: An Analysis of 300+ Impact Investing Fund”
https://thegiin.org/impact-investing/need-to-know/
17 Those funds that have been set up between 1998 – 2004 and have completed the life term of the fund
18 GIIN (2015), “Introducing the Impact Investing Benchmark”
19 GIIN, J.P. Morgan (2014), “Spotlight on the Market: The Impact Investor Survey”
20 http://www.inclusivebusinesshub.org/ib-in-asia/actors
21 GIIN, J.P. Morgan (2014), “Spotlight on the Market: The Impact Investor Survey”
15
16
18
AVPN has an active membership base of 290 organisations. They operate as a think-tank
and conduct research and publish reports on the trends in the venture philanthropy space.22
Annually, they also carry out a conference attracting at least 100 speakers, and showcasing
approximately 30 investments. The investment showcase focuses on investees that AVPN
members are currently investing in. Most of these investees are often social enterprises such
as NEEDeed Foundation, The Social Factory, RunOurCity, and Coral Triangle Center
although there is an increasing trend where selected social enterprises have inclusive
business characteristics.23
4.3 IB advocates and capacity builders provide financial and nonfinancial support
25.
Bilateral donors have traditionally focused on social enterprises. Bilateral
donors predominantly give out more grant money compared to multilateral donors. This
aligns well with the needs of social enterprises or charities. This is driven by the belief that
social enterprises are better connected to the grassroots and ‘do good’. For example, about
90% of USAID giving in 2013 was grants while loans made up about 5%.24 In the same year,
less than 10% of the World Bank Group giving was grants while loans, and equity made up
the rest.25
26.
The United Nations Development Programme–through its flagship Business
Call to Action (BCtA) is a strong advocate for the development of inclusive business
models. The BCtA is a global leadership platform where businesses make commitments
towards integrating the poor in their operations. Companies benefit from the sharing of
knowledge and expertise, seek development advice and assistance from the alliance, and
build networks and linkages with other companies, donors, and development stakeholders.
Businesses that are interested in pursuing inclusive business approaches, often seek out the
BCtA to leverage on the existing network and knowledge available. See annexure 8.2 for
further information on the BCtA.
27.
The World Business Council for Sustainable Development (WBCSD) aims to
generate constructive solutions and take shared action to drive business action on
sustainability by promoting interactions between corporations. The WBCSD is a CEOled organisation working with 65 independent national and regional business councils and
about 200 large companies. To promote inclusive business, it serves as a knowledge base
for best practices, develops toolkits to support company managers during the
implementation phase, and creates local “hubs” to promote collaboration within its network.
See annexure 8.3 for further information on the WBSCD.
28.
Business associations have not taken to inclusive businesses yet, but can
potentially play a very significant role in promoting knowledge on and advocacy for
inclusive businesses. Business associations/chambers of commerce can help disseminate
the concept of IB across its association members and be important actors in pushing for
public reform. Historically, in the sustainable development space, business associations
have facilitated companies’ access to information and knowledge, built capacity for corporate
professionals, created a common voice of business in policy making, and fostered
22
https://avpn.asia/
http://2016.avpn.asia/investment-showcase/
24 Scott Morris and Madeleine Gleave (2015), “Realising the Power of Multilateralism in US Development Policy”
25 Scott Morris and Madeleine Gleave (2015), “Realising the Power of Multilateralism in US Development Policy”
23
19
partnerships26. Similarly, these activities can also help address some of the barriers and
needs of inclusive businesses. One such example is PISAgro’. It is a working group of
agribusiness based in Indonesia. It serves as a platform to facilitate dialogue, mobilise
commitments, and new partnerships to achieve a target of 20% increase in agricultural
productivity, 20% increase in farmers’ income and 20% decrease in greenhouse gas
emissions. As an organisation, it has identified ten priority commodities relevant to
Indonesia, where its members will develop innovative solutions for agri-financing, the usage
of Information & Communication Technology, conducting research, and for developing
infrastructure.27
29.
Few foundations have recognised inclusive business as an underlying theme
of investment but are still concentrating on supporting development in specific
sectors. There are only a few foundations that actively work to support inclusive businesses.
There are also some that support social enterprises. A few examples are mentioned below.
 The Rockefeller Foundation has included “Inclusive Economies” as one of their
two overarching goals as part of their investment strategy. In Asia, the foundation
has been working to address energy poverty through mini-grids for lighting and
business use.28 In Africa, the Rockefeller Foundation launched Digital Jobs Africa
as a way to connect 1 million unemployed youths with the increasing popularity of
business outsourcing practices.29
 “Inclusive Economies” is one of the overarching themes of the Ford Foundation.30
Within that program, they are committed to building institutions and networks that
promote the quality and availability of work in both formal and informal sectors,
and strengthening the infrastructure of the local impact investing market to attract
more funds. Having inclusive business as an underlying theme will enable
foundations to make more forward-looking investments and engage the locals in
the economic development process, resulting in a more sustainable impact.
 Shell adopted an “enterprise-based model” as of 2003 that focuses on supporting
scaling social enterprises and developing inclusive markets. This shift was
motivated by a desire to have lasting impact at scale. Shell Foundation runs an
incubator, in addition to many other support mechanisms, built to support earlystage, market based solutions that both deliver impact and financial returns.31
 Skoll Foundation has invested over $400 million, to date, in social entrepreneurs
through its “Skoll Awards for Social Entrepreneurship” program. Selection criteria
include the fact that the innovation must have a viable business model with the
potential to have sustainable long-term impact and scale. The foundation has a
fundamental believe that impact must be scalable and sustainable to be truly
successful.32
 AirAsia Foundation has a mandate to support social enterprises that can have
long-lasting impact in their communities. Grants by the foundation are only given
if there is proof that the enterprise has the capacity to generate income. This
ensures that the organization once the one-time grant runs out.33
26
http://www.inclusivebusinesshub.org/profiles/blogs/promoting-inclusive-business-what-role-for-businessassociations
27 http://www.pisagro.org/
28 https://www.rockefellerfoundation.org/our-work/initiatives/smart-power-for-rural-development/
29 https://www.rockefellerfoundation.org/our-work/initiatives/digital-jobs-africa/
30 https://www.fordfoundation.org/work/challenging-inequality/our-approach/inclusive-economies/
31 http://www.shellfoundation.org/Our-Focus/Incubator
32 http://skoll.org/about/approach/
33 http://www.airasiafoundation.com/humanitarians/
20
30.
There are a host of other players who are increasing their focus on inclusive
businesses. There are several consultants in the inclusive business space including
organizations in the social development space like Dalberg and Endeva and main-stream
consulting organizations like PWC, SNC, and Deloite and Touche. Top business schools
around the world like The Fletcher School in Tufts University have increased their focus on
inclusive businesses and sustainable development. There are also focused programs like
the Inclusive Business & Value Creation Program at HEC Paris, Endeva at Harvard and
Business Innovation Facility at Institute of Development Studies. Furthermore, several
inclusive business hubs have sprung up globally to help accelerate and grow such
businesses. Examples include the global inclusive business challenge at the World Business
Council for Sustainable Development, inclusive business initiative at the Insight Centre for
Community Economic Development, BoP hub at the World Toilet Organization, BoP
innovation centre in Netherlands and the Inclusive Business Accelerator in Uganda,
Mozambique, Netherlands and Vietnam. There is also an online hub, The Practitioner Hub
for Inclusive Business that connects practitioners to help their business ventures grow with
the help of several partners (ADB, PWC, IBAN).
4.4
Regulators and governments are barely active
31.
Government’s role in supporting inclusive businesses has been weak. Although
governments are increasingly interested in involving the private sector in tasks which have
traditionally been the responsibility of the state, namely the provision of affordable and
relevant services to the poor and low-income people, and the creation of new decent jobs,
their overall support to inclusive businesses has been weak at best.
32.
To encourage more companies promoting inclusive business models,
governments need to single out such business models from traditional investments
which also include the poor, for example SME or informal sector activities. Once such
models are identified, the government can target its support by either prioritizing these
inclusive businesses in existing industry support programs, or by creating new incentives.
Government can (a) promote IB accreditation and award systems, as well as peer learning,
(b) help with sharpening the business plan of existing models to increase social impact, (c)
facilitate licensing and regulations (including public procurement) for better market
participation of IB, and (d) provide specific financial incentives and risk mitigation measures
for investments.
33.
Although overall government and policy support for IBs remain weak, a few
governments are taking the first few initiatives. Some countries in Africa and Latin
America, and in high-income economies (e.g. Australia, France, Germany, Hong-Kong,
Japan, Singapore, UK, USA) have developed specific policies to promote inclusive business
(see examples below). Governments in Asia are increasingly interested in developing their
own policies.
 The Philippines is creating an inclusive business accreditation system to
determine eligibility for incentives34 through its Board of Investments under the
Department of Trade and Industries. The accreditation is based on a composite
rating tool, the criteria of which were developed in partnership between
government and business associations. The criteria include the business case,
the social impact, assessed by reach [scale and targeting], depth [extent of
improvement], and systemic change contribution), and innovation to solve social
(and environmental) problems.
34
http://www.inclusivebusinesshub.org/profiles/blogs/exciting-time-for-inclusive-business-in-the-philippines
21



The Republic of Korea’s Social Enterprise Promotion Act of 200735 is targeted at
social enterprises. For any company that wants to be recognised as a social
enterprise, they will have to be certified by the Ministry of Employment and
Labour. To support them in the certification process, the Korea Social Enterprise
Promotion Agency (KoSEA) was set up to support fair certification screening and
plan for quality improvement in certification services.
Vietnam revised its Enterprise Law, to provide special treatment to social
enterprises in the granting of licenses and certificates.36
Recently, Thailand’s cabinet exempted social enterprises from corporate taxes, if
they allocate 70% or more of their net profit to social work.37
5 FIVE REASONS WHY DEVELOPMENT BANKS
SHOULD PROMOTE INCLUSIVE BUSINESSES
5.1
Inclusive Business is a new market opportunity
34.
A high growth multi-billion dollar opportunity... Landscape studies conducted by
ADB in 2012-13, and other institutions point to a large unmet need for supporting inclusive
businesses. For example, investments of USD 90 million in the Mekong region38, USD 120
million in Vietnam39, USD 50 million in Indonesia40 and USD 30 million in Philippines 41.
Revised estimates in 2015 show that the industry is ready to absorb roughly USD 1 billion
and is projected to be a USD 6-7 billion opportunity per annum in Asia alone42, with a CAGR
of 20%. Given the higher buying power of the BoP, and the high incidence of inclusive
businesses in Latin America, the opportunity is expected to be bigger than in Asia.
35.
…driven by the private sector. Social entrepreneurs and corporates, alike,
recognize the potential of IB in solving the problems of the poor. This is evident in the
increasing number of SEs being set up across the world. Similarly, many corporates
increasingly desire setting up an inclusive business or an initiative. Primary reasons that
seem to drive this trend are – (a) need of new growth markets, (b) reduce supply chain risks,
and (c) as a response to growing public pressure.
5.2 There is money to be made and it is less risky than
generally presumed
36.
High expected rate of return. Unpublished studies by the IDB and IFC show that
the inclusive business equity portfolio has higher or comparative returns than their traditional
investments (due to stricter awareness of financial and non-financial risks, better market
understanding, and consequently more innovative financial structuring of investments) and
35
http://www.ilo.org/dyn/natlex/natlex4.detail?p_lang=en&p_isn=78610&p_country=KOR&p_count=145
http://vietnamnews.vn/economy/279915/new-laws-promote-social-enterprises-in-viet-nam.html
37 http://www.bangkokpost.com/archive/bill-targets-populist-spending/898856
38 ADB (2013), “Developing the Business Case for investing in Inclusive Business in the Mekong, A market brief”
39 ADB (2012), “Establishing an Inclusive Business Private Equity fund in Vietnam, A market scoping study”
40 ADB (2013), “Developing the Business Case for investing in Inclusive Business in Indonesia, A market scoping
study”
41 ADB (2013), “Inclusive Business study Philippines”
42 http://blogs.adb.org/blog/opportunities-investing-inclusive-business-southeast-asia
36
22
debt portfolio has equal returns as their traditional investments.43 A study by JP Morgan in
2011 found that expected returns of inclusive business deals in emerging markets to be 812% for debt investments and 20-25% for equity investments.44 Similarly, in the report on
evaluating the inclusive business potential at ADB, the study describes ratings of 8
investments on a scale of 1(worst) to 5 (best), and the average score was found to be 3.75,
defined as “meets minimum standards for inclusive business”.
37.
Inclusive business investments meet the current risk tolerances. Although some
erroneously believe that inclusive business investments bear higher risks, numerous studies
by the IFC, IDB, commercial banks, and impact investors show that this is not the case.
Early experiences of Opportunities for the Majority (OMJ) at the IDB, have proven that
“inclusive business investments do not mean higher risk nor do they result in lower returns.
All OMJ investments are fully bank compliant and meet established bank risk and return
criteria. In some instances, expectations are that some of the businesses will outperform
initial expectations—both in social and business performance”.45 Hence, it is not the nature
of the transaction that makes an inclusive business deal more risky. It is often the lack of
information and expertise on a sector that creates the false perception of an inclusive
business deal being riskier than a regular private sector investment. For example, the private
sector team can be expected to be well versed with the working of the setting up of a large
energy project. However, it is unlikely that they will have the same level of experience while
analysing a deal that aims to improve access to energy through portable solar appliances for
the poor.
5.3 Strategic alignment on reducing poverty and the role of
private sector in it
38.
Poverty reduction is central to the mission of all development banks and of
inclusive businesses. Development banks have poverty reduction explicitly mentioned in
their vision and/or mission statements (see table 3). Similarly, one of the core principles on
which inclusive businesses exist is to improve the lives of the BoP by innovating, to
systemically meet their needs. Hence, there is a natural alignment between the purpose of
development banks and inclusive businesses.
39.
Increasing focus on private sector operations in development banks. Private
sector approaches to achieving development goals are becoming increasing commonplace
and viable, and many development actors are shifting their focus and support towards these
more sustainable models. For example, ADB’s mid-term review of its strategy 2020 states,
“…More private investment is needed to address large infrastructure needs, support
economic growth, create jobs, and reduce poverty… …ADB will systematically pursue
Strategy 2020’s target of scaling up ADB’s PSD and PSOs to 50% of annual operations by
2020”.46 This is primarily driven due to two reasons: (1) the ability of the private sector to
directly reach the poor and (2) higher commercial returns on private sector deals.47
43
http://www.inclusivebusinesshub.org/page/ib-asia-definitions
Bauer, Armin and Domingo, Lydia (2016), “Financing Inclusive Business, Background paper for the 2nd
Inclusive Business Forum for the Philippines”
45 ADB and IDB (2013), “Working Together in Pursuit of Inclusive Business: Sharing the Latin American and
Caribbean Experience with Asia and the Pacific”
46 ADB (2014), “Midterm Review of Strategy 2020: Meeting the Challenges of Transforming Asia and Pacific”
47 As per ADB’s 2014 financial report, ADB applies market-based pricing for non-sovereign loans as opposed to
cost past-through basis (interest rate is determined by the cost of funding the loans plus a contractual spread)
for sovereign loans.
44
23
DB
Table 3: Mission/Vision statements of development banks
Mission/Vision statements
IFC
The Mission of IFC, a member of World Bank Group, is to promote private
sector investment in developing countries, helping to reduce poverty and
improve people's lives.
ADB
The ADB aims for an Asia and Pacific free from poverty
IDB
The IDB works to improve lives in Latin Amerca and Caribbean. Through
financial and technical support for countries, the bank works to reduce
poverty and inequality and help improve health, education and advance
infrastructure. Its aim is to achieve development in a sustainable climate friendly way.
Source: Development banks’ websites
5.4
Development banks bring unique capabilities
5.4.1 Development bank investment is a stamp of approval
40.
Financing from a development bank provides much required validity to the
business model of the investee. In unexplored markets, activities of development banks
provide market signals to other investors. Inclusive businesses interviewed for this report
regularly mentioned that an investment from a development bank made it easier for them to
secure later funding, as other investors were able to use that investment as a proxy on the
health and viability of an investee. “Even when opportunities exist, somebody needs to prove
there is money to be made in these exotic markets by leading the way. These “somebodies”
are often development finance institutions, and the successes mentioned above could not
have happened without investments and the “good housekeeping seal of approval” from
these institutions”.48
41.
Validity drives the ability to raise funding from other sources. Development
banks are able to ‘crowd-in’ other investors in to a new market. This is often referred to as
the demonstration effect, and is tracked as the leverage49 created by development banks
due to its investment activities. For example, IFC and ADB are able to generate leverage in
the range of 35% - 70%.50
42.
48
Leverage in development bank deals is a result of three factors.
 Co-investment. Development bank investments cover only 20-50% of the project
cost. The investee is required to raise the rest of the capital from the market, in
coordination with the bank.
http://www.forbes.com/sites/danielrunde/2014/10/17/development-finance-institutions-come-of-agedfi/#6b881d016e52
49 Leverage is measured as Core mobilization/Total investment
50 Data reported as ‘Direct Value-Added Cofinancing’ for ADB and ‘Core Mobilization’ in annual reports of IFC
and ADB
24


Meticulous project assessment. Development banks carry out a very rigorous
assessment of the project and the company. This often includes detailed
business and financial due diligence, in-depth impact, and social and
environmental assessment. The investee company is able to use this project
documentation/information to assuage the concerns of other investors. This is
also reflected in the low loan losses in these banks.51
Publicity. Co-financing with a development bank often boosts the image and
perception of the co-investor.
5.4.2 Development banks improve project design by leveraging internal
expertise
43.
A development bank serves as a knowledge repository which is often
leveraged to improve the project design. An investment officer has access to many
internal experts (on climate change, supply chain, gender issues, social and environmental
effects etc.), a network that brings significant information on geographies, sectors, and
business and impact models. The investment officer is able to tap in to this knowledge and
incorporate these elements which the investee company would not be able to conceive on its
own. This often translates to superior project design – from both business and impact
perspectives - for the investee company.
5.4.3 Critically needed long term investments
44.
Development banks are the original long term investors. Large scale government
engagement, especially on long-term infrastructure programs, means they have a natural
proclivity towards making investments that help build out an eco-system in the long term.
Most investments of development banks are in the range of 5 – 7 years for private sector
and greater than 10 years for sovereign deals.52 While at a smaller scale, similar thinking
and patience is required in many of the inclusive business investment spaces.
5.4.4 Close government ties
45.
They enjoy legitimacy with governments based on their track record and
multilateral structure. Development banks have a long term relationship with the
government. For example IDB and ADB make almost USD 3 billion and USD 11.5 billion
investments in sovereign loans per year respectively. Furthermore as multilateral institutions,
a development bank’s structure is broadly seen as less political (as compared to bilateral
institutions) as it minimizes individual country interest. This allows them to provide technical
assistance and advocate for policies that promote business activity. Moreover, this also
isolates them from changing government preferences and policies with changing
governments.
46.
A development bank investee is often isolated from political and regulatory
shocks. Development banks can usually help an investee in instances of political turmoil or
regulatory shocks. For example, investee companies are relatively protected from
51
In 2013, the specific provision for loan losses for ADB as a proportion of non-sovereign portfolio was 0.2%.51 In
June 2014, IFC’s non-performing loans as a % of the loan portfolio was 5.1%. As of March 2016, IADB’s
allowance for loan and guarantee losses was approximately at 0.6% of total outstanding loans and guarantees.
Source: ADB information statement 2014, Management’s Discussion and Analysis and Consolidated Financial
Statements June 30, 2015, and IADB Information Statement March 2016
52 This is much larger as compared to the commercial banks which typically have investment horizons of 3 – 5
years.
25
government expropriations because expropriation of an investee company implies an
expropriation of a multi-lateral development agency which can have severe political and
economic ramifications due to pressure from other member countries.
5.5 Structural
disadvantages
development opportunities
present
learning
and
47.
Development banks have traditionally tended towards public sector
investments, primarily in infrastructure. This is based on the theory that the benefits of
these public sector infrastructure projects would grow the economy and generate trickle
down effects for the poor. This legacy of large infrastructure deals restricts the ability of
development banks to do inclusive business deals as follows:
 Deal size. The financing need of inclusive businesses is usually range between
USD 3 to 30 million. This can be perceived as too small by a development bank
which traditionally invests in large deals (USD 50–300 million). As a result of the
small deal size, transaction cost as a percentage of deal size is much higher for
an inclusive business deal as compared to a regular investment.
 Risk assessment. Risk assessment in a typical infrastructure deal emphasizes
broad macro and sectoral trends, and sovereign level risk. However assessing
the risk for inclusive business deals requires adaptation of the risk assessment
methodologies, based on BoP subject matter expertise.53 This is not intended to
dilute the risk assessment criteria in any way, but rather emphasize that having
subject matter expertise is a pre-cursor to assessing risk appropriately. Hence, a
lack of this subject matter expertise/knowledge leads to a perception of high risk.
It can often boil down to the knowledge of the project officer to build a compelling
case for the risk assessment teams.
 Internal processes. Internal processes such as those around documentation
and due diligence requirements are setup for large institutional or corporate
investments and need to be adapted for inclusive businesses.
48.
These lead to a mismatch between the position of a development bank and the
expectation of a potential inclusive business investee. The mismatch can result on a
number of elements of the deal making process – time for deal preparation and approval,
availability of technical assistance, cost of running the due-diligence, decision making
process, standards and extent of impact measurement, and finally on project design. The
table below captures these differences.
53
ADB and IDB (2013), “Working Together in Pursuit of Inclusive Business: Sharing the Latin American and
Caribbean Experience with Asia and the Pacific”
26
Table 4: Expectation and reality of internal processes
Internal
processes
DB position
IB investee’s expectation/reality
Time for deal
preparation
6 – 12 months
3 - 4 months
TA
Investee to finance
Usually does not have the resources
Cost
High cost of legal and business due
diligence to be funded by the investee
Expects the investor to bear the cost
Decision making
process
Requires convincing multiple internal
stakeholders, which is time inefficient
Single point of contact who has complete
authority to “take the call”
Ex-ante impact
assessment
Required
Usually doesn’t have any impact
measurement
Development
oriented questions
Wants to integrate other development
Often unaware of importance of such
priorities such as gender equality, climate
requirements
change etc. in to the project design
Source: Dalberg analysis
49.
These “challenges” should be viewed as learning and development
opportunities for both the development bank as well as the investee company.
 For the inclusive business investee, a detailed project assessment leads to a
better understanding of the business risks. The business case becomes stronger
due to increased knowledge and documentation. This allows them to access
other investors for co-investment not only for this investment but also for the
future.
 For the development banks, investment in inclusive businesses exposes them to
new asset class, allowing them to diversify their portfolio. This also allows them to
learn about new business models and provides much needed innovation in their
portfolios.
6 CURRENT IB ENGAGEMENT OF DEVELOPMENT
BANKS
6.1 IDB: The frontrunner in setting up IB as a separate
business line
50.
A novel approach to realize the bank’s mission. In June 2007, the Inter-American
Development Bank’s (IDB) Board of Executive Directors under the leadership of President
Luis Alberto Moreno recognized the potential of inclusive businesses and approved the
Opportunities for the Majority (OMJ) initiative to focus exclusively on investing in financially
viable and impactful inclusive businesses. With this, the IDB was the first Development Bank
to seize this opportunity. One of the first projects approved in 2008 was a USD 10 credit
guarantee to Banco de Credito e Inversiones (BCI), a Chilean bank, to provide loans to
80,000 micro-entrepreneurs through a distribution network of large corporate partners. The
27
project also included a grant component of US$600,000 to support BCI in training their
lending staff in new credit technologies including electronic payments and online collection.
51.
Success that outlived its original ambition. The OMJ pilot was restricted to a total
portfolio size of USD 250 million and a maximum investment of USD 10 million per project. It
would focus on businesses that were intrinsically inclusive rather than converting traditional
businesses to inclusive businesses. It was originally intended to last for only 3 years, after
which the team would be subsumed within the IDB’s private sector team. At the end of the
first term, the OMJ initiative was extended due to its promising results. By 2012, the OMJ
initiative was considered a success as it established a clear case of profitability and impact
of inclusive businesses.
6.1.1 Investments
52.
Between 2007 and 2015, the OMJ program has executed over 60 investments
worth over USD 410 million. OMJ supported inclusive businesses by providing loans,
guarantees and technical cooperation. Significantly, OMJ has been able to sustain
momentum despite a very small deal size, in an environment that is usually supportive of
larger deal sizes.
 The average inclusive business deal size for OMJ was about 90% smaller than
the regular investment of the bank’s private sector department. While the mean
for inclusive business deals is USD 7.3 million, it is much higher at USD 71
million for other private sector investments of IDB.
 OMJ executed about nine inclusive business deals a year (mean), which is about
18% of all their non-sovereign guaranteed deals by number and about 3.5% of
the capital deployed, given the small size of the deals (see figure 6).
Figure 6: Share of IB investments in non-sovereign investments at IDB
23.9%
22.2%
18.0%
17.2%
14.3%
3.2%
FY 11
3.8%
FY 12
4.8%
FY 13
% IB deals/Non sovereign investments (by value)
2.4%
FY 14
12.5%
3.3%
FY 15
3.5%
Mean
% IB deals/Non sovereign investments (by number)
Source: Annual investments (overall) from ‘Loans and Guarantees approved’ from IDB Annual reports
2010 – 2015
53.
Pan Latin America and Caribbean success. OMJ invested in 16+ countries (about
60% of all countries in Latin America), with the top 8 countries representing 81% of all
investments by volume and 71% by number (see figure 7). Colombia, Ecuador, Peru and
Mexico have each received about USD 50 million in investment, followed by Paraguay, El
Salvador and Brazil receiving USD ~30 million in investment. OMJ has invested in 8
companies in Mexico, the highest in Latin America. Mexico is followed by Paraguay, El
Salvador and Brazil at 6 each.
28
Figure 7: Regional distribution of IDB’s inclusive business investments
14%
14%
14%
13% 14%
12%
10%
9%
8%
7%
17%
8%
7%
10%
7%
10%
10%
7%
5% 5%
Colombia
Ecuador
Peru
Mexico
Regional
% by value
Paraguay El Salvador
Brazil
Nicaragua Others (7
countries)
% by number
Source: OMJ website, Dalberg analysis
54.
Inclusive Business has been established as a ‘genuine business line’ across
multiple sectors. Investments are well distributed (compared to other development banks)
across multiple sectors given their ability to do small deal sizes (see figure 8). Financial
markets and microfinance remain the top sector by both volume and number (at 43% and
29% respectively). Sectors such as housing and agriculture have received substantial
number of investments as compared to other development banks. However, ICT and utilities
have lower share of investments relative to other development banks. It is also worth noting
that contributions from the health and energy sectors to the portfolio are negligible.
Figure 8: Sectoral distribution of IDB’s IB investments
43%
29%
23%
20%
15%
9%
7%
8%
15%
7%
3%
Financial
Services
Housing
Education
Agriculture
% by value
Multisector
funds
6%
7%
3%
3%
Infrastructure/ Retail Services
Utilities
1%
Others
% by number
Source: OMJ website, Dalberg analysis
55.
Debt is the primary mode of capital deployment. Debt and Partial Credit
Guarantees and Risk-Sharing Facilities comprise 94% of the total investments by volume
(see figure 9). Grants also contribute to 10% of all investments by number, however they
form a miniscule fraction by volume considering the average grant size is of USD 0.16
million only.
29
Figure 9: Distribution of IDB’s IB investments by capital deployment
79%
64%
16%
17%
10%
4%
1%
Debt
Partial Credit
Guarantees and
Risk-Sharing Facility
2%
0.2%
Multiple
% by value
7%
Grants
Data unavailable
% by number
Source: OMJ website, Dalberg analysis
6.1.2 Technical Assistance (TA) for Inclusive Businesses
56.
OMJ recognized early on that technical support is vital to project development.
This is in line with the strategic objectives of its Private Sector strategy, which is to expand
the delivery of advisory services. Hence, OMJ offered significant support for capacity
building. For example, OMJ granted USD 0.27 million in addition to a USD 2 million loan to
FINAE, a financial institution which works to improve access to higher education for lowincome students in Mexico. This helped strengthen the operational processes of the
company, and to provide training and tutorial support to beneficiaries. Technical assistance
(TA) was sourced from multiple trust funds administered by the IDB Group and the
Multilateral Investment Fund (MIF).
6.1.3 Knowledge work and Partnerships
57.
IDB is the “go-to” organization in Latin America and the Caribbean region for
knowledge on IB. The IDB has gathered a vast amount of information and knowledge on
the lives of the BoP, business models that can viably reach and benefit the poor, the
landscape of private sector players, impact measurement etc. It has channelized this
knowledge for the sector by way of publishing over 60 reports and case studies. The focus of
its reports have been primarily three fold:
1) Identifying opportunities at the BoP, through reports such as ‘A Rising US$750 Billion
Market’ and several others,
2) Landscape studies such as the ‘A Firm-level Approach to Majority Markets Business’
and ‘Many Paths to a Home: Emerging Business Models for Latin America and the
Caribbean Base of the Pyramid’ and
1) Case studies on portfolio companies.
58.
IDB has become the ‘IB Honeypot’ attracting all important stakeholders in the
ecosystem. Though OMJ, the IDB conducted many conferences and roundtables
throughout the year. One of its key events was the biennial BASE Forum, an event with
typically 700-1,000 participants, hosted by dignitaries. Furthermore, it conducted Annual
Strategic Partners’ Dialogue meetings and roundtables.
30
59.
IDB’s helping hand to initiate Inclusive Business in ADB. IDB helped the ADB
setting up its IB initiative right from the beginning in 2012-13. The IDB has provided valuable
advice to ADB, on setting up its inclusive business practise and IB forums. It also
collaborated with ADB in organizing the Asian IB forum in 2012 and 2016. IDB also invited
ADB to their forum, to learn from ADB’s public sector work. The ADB and the IDB have also
jointly launched a publication54 that highlights lessons from the Inclusive Business
experience in Latin America applicable for Asia, and also discusses relevant lessons for the
ADB as it develops its own Inclusive Business practice. ADB and IDB have agreed in
supporting the Asia Pacific Economic Cooperation (APEC) in their respective countries on
IB.
6.1.4 Institutionalization
60.
Dedicated, high-quality in-house capacity and leadership. In 2008, under the
strong leadership of its President Luis Alberto Moreno, the OMJ initiative was set up. OMJ
was organized in a separate division under IDB’s private sector department. Internal
cooperation was critical to establishing internal credibility and operational manoeuvrability,
with the ultimate objective of mainstreaming the inclusive business practice within the
organization. Furthermore, staff sharing arrangements and OMJ sponsored working groups
were set up. An example of internal partnerships is OMJ’s partnership with the MIF, by which
the MIF offered services, such as equity investments and TA, which the OMJ could not,
while OMJ offered direct lending that the MIF could not.55
61.
Emphasis on internal capacity building. The OMJ team regularly identified internal
champions and conducted trainings on the subject. Champions not only helped in identifying
and closing the deal, but also creating the necessary internal buy-in.
62.
Inclusive business team has now been mainstreamed in to the Inter-American
Investment Corporation (IIC). Until Dec 2015, the IDB Group had four different windows
serving the private sector - (1) MIF, (2) Structured Corporate Finance (SCF), (3) OMJ and
(4) IIC. As of January 2016, three of the four private sector windows were consolidated in
order to improve the effectiveness of the IDB Group private sector activities in the region.
Under this new operating structure, SCF, OMJ and the IIC were merged into the legal entity
of the IIC (loosely called the ‘new IIC’). While under this new structure OMJ does not exist as
a separate window any more, investments in Inclusive Businesses have now been
“mainstreamed” across the new IIC. Enhancing the private provision of basic goods and
services, creating income generating opportunities and social mobility for vulnerable
populations continue to be a priority for the organization.
54
http://www.adb.org/publications/working-together-pursuit-inclusive-business-sharing-latin-american-caribbeanexperience
55 Working Together in Pursuit of Inclusive Business: Sharing the Latin American and Caribbean Experience with
Asia and the Pacific, ADB and IDB (2013)
31
Figure 10: IB team(s) within the IDB (pre 2016)
President
Public sector
teams
Multilateral
Investment
Fund
Private sector
teams
Inter-American
Investment
Corporation
Opportunities
for the
Majority
Structured
Corporate
Finance
Inclusive Business Operations
Source: IDB and IIC website
Figure 11: IB team(s) within the IDB (2016)
President
Public sector
teams
Private sector
teams
Multilateral
Investment
Fund
Inter-American
Investment
Corporation
Inclusive Business Operations
Source: IDB and IIC website
6.2
IFC: The global market leader in Inclusive Business
63.
The International Finance Corporation (IFC) is the biggest investor in inclusive
businesses. By 2015, IFC’s inclusive business clients integrated more than 300 million people,
including farmers, students, patients, utility customers, and micro borrowers in core business
operations. These investments are helping to improve lives, promote prosperity, and transform
sustainable development outcomes in low-income communities around the globe.
6.2.1 Investments
64.
Since 2005, the IFC has supported over 450 inclusive businesses across the
world, deploying over USD 12 billion in capital.
 The IFC has been able to maintain a steady rate of deploying over USD 1 billon
per annum approximately in inclusive businesses over the past decade. Inclusive
businesses constitute about 10% of all investments (see figure 12).
32


The IFC completes 50-75 deals per year globally, which are about 12% of all
deals approved.
The mean (not excluding outliers) deal size for inclusive business is USD 26
million, compared to USD 27 million for traditional private sector deals.
Figure 12: Share of IB investments in overall investments at IFC
16%
14%
14%
12%
12%
12%
12%
10%
7% 8%
FY 08
8%
7%
FY 09
FY 10
8%
FY 11
FY 12
% IB deals/Total investments (by value)
FY 13
FY 14
FY 15
Mean
% IB deals/Total investments (by number)
Note: (1) IFC changed its reporting practice regarding investment amounts, beginning 2015 and
reported short-term finance investments separately from long-term investments. Hence FY 15
numbers reflect only long term investments. (2) Mean investment size does not exclude outliers. (3)
All numbers in millions of USD, unless otherwise specified. (4) Numbers for FY13, 14 and 15 are
approximate computations and FY 08 and 10 are unavailable.
Source: IFC Annual reports 2012 – 2015; IFC internal presentations; Masuoka, Toshiya – Director
(2015), Inclusive Business at IFC; IFC issue briefs (2013), Inclusive Business models; Inclusive
Business Solutions: Expanding opportunity and access at the base of the pyramid (2010); Dalberg
analysis
65.
IFC’s investments are truly global. Capital has been deployed in well over 90
countries, primarily using the debt instrument. The Latin American and Caribbean region
receives the maximum investment (USD 3.25 billion) followed by East Asia and the Pacific
region (USD 2.75 billion). In Asia, the IFC has invested about USD 5 billion, with India
receiving almost more than one-third of the capital, followed by Indonesia at 22% and China
at 13%.
Figure 13: Regional distribution of IFC’s IB investments
26%
22%
17%
17%
10%
5%
Latin America
& Caribbean
East Asia
& Pacific
South Asia
Sub-Saharan
Africa
Europe &
Central Asia
Middle East &
North Africa
3%
Regional
% by value
Note: Data on IFC’s investments by number was not available publicly
Source: Inclusive Business at IFC, WBCSD Inclusive Business seminar (2014); IFC internal
presentation
33
66.
The portfolio has a diverse sectoral mix. Financial markets and microfinance, ICT,
agribusiness and forestry, education, health and housing, contribute to more than 80% of the
portfolio. Utilities, focusing on energy and water among others, form another 8% of the
portfolio.
Figure 14: Sectoral distribution of IFC’s IB investments
41%
17%
16%
10%
8%
6%
2%
Financial
markets
(including MFI)
ICT
Agribusiness
and Forestry
Education,
Health and
Housing
Utilities
Manufacturing
Others
% by value
Note: Data on IFC’s investments by number was not available publicly
Source: Inclusive Business at IFC, WBCSD Inclusive Business seminar (2014); IFC internal
presentation
6.2.2 Technical assistance for Inclusive Businesses
67.
Inclusive business are ‘made’ and not ‘born’, suggests IFC’s experience.
IFC leverages technical assistance to enhance the commercial viability and impact of its
investments. IFC invests about USD 200 million every year on advisory services for all
its projects and not just inclusive businesses, which is much higher than other
development banks. Its average investment on TA as a percentage of total capital
deployed is about 1.5% of total investment per deal. Anecdotal evidence shows that the
inclusive business share in the advisory services is slightly higher than traditional
companies given their additional needs (estimated to be at least USD 20 – 25 million per
year). Manila Water is a prime example of the quantum and quality of technical
assistance provided by IFC. IFC invested USD 75 million in debt and equity in the
company and provided a USD 5 million grant for technical assistance. The advisory
service helped the company rewrite its corporate governance manual and develop a
sustainability strategy, marking the first time a Philippine company publicly disclosed its
environmental and social performance on an annual basis.56 Furthermore, this allowed the
investee company to test models to include more women in to their operations.
68.
“Market insights” supports by providing targeted IB insights and analytics, a
first among development banks. IFC recognizes that its clients often work in information
scarce environments. Data for low-income market segments in emerging economies is often
fragmented and unreliable, if available at all. It leverages its experience in working with the
BoP to develop insights that often help their clients in building their supplier networks and/or
reaching low-income customers. The scope is targeted to the following three topics:
 Customer, Distributor and Supplier Portraits. Analyzing sociodemographic
information and other data on the needs, motivations, requirements, and capacity
of suppliers, distributors, and customers.
56
IFC Case study (2012), “Manila Water Company”
34


Measuring Satisfaction. Developing processes to measure satisfaction with and
perceptions of a company’s activities vis-à-vis its stakeholders across the value
chain.
Market Segmentation. Identifying the needs and aspirations of key market
segments in order to tailor product or service offerings or adapt models of
engagement
69.
Publicly available information on Market insights team is focussed on the kind
of work done and does not document impact. One significant example is in the work
done by the team to uncover that satisfaction and well-being of farmers are closely
correlated with loyalty among Nicaraguan farmers in the value chain. The key metrics of
satisfaction and well-being were identified as direct relationships with company. For
instance, 84% of farmers who directly dealt with the company sold over half their crop to the
company compared to 61% of farmers who did not access the company centres directly. At
the same time, the team also brought out the nuances in satisfaction and well-being linked to
gender, farm size and region of operation, offering recommendations for tailored approaches
by the company. The Market Insights also worked with cocoa smallholder farmers in Cote
d'Ivoire to establish the relationship between the perception of farming, farmer well-being
and agricultural productivity. It led to the identification of the drivers of productivity, such as
access to services, inputs and specific training needs, while identifying niche channels such
as mobile money to increase engagement with farmers. The use of data to drive market
insights led to a better targeting and strategic redressal of concerns, while internally ensuring
more robust data management systems for the client.57
6.2.3 Knowledge work
70.
IFC is a thought leader on inclusive businesses. The IFC is considered a thought
leader in the IB sphere and has published over 18 reports focusing on lessons learnt by IBs,
IB case studies, and policy and private sector advocacy. Its collection of over 40 case
studies58 on its portfolio companies presents a vivid picture of the context, the challenges,
and development impact of the company and on the additionality brought along by IFC.
71.
Knowledge work focuses primarily on sharing information on inclusive business
models and case studies, and BOP consumption data and potential and bring to life some of
the insights of its portfolio companies. In 2007, the IFC came up with the first large scale
inclusive business report. It was a study in coordination with the World Research Institute
(WRI) on defining the BOP potential through it’s The Next 4 Billion study. In 2014 IFC
together with the World Bank set up an elaborate, user friendly website59 on consumption
data of the BoP. This website allows readers to access multiple data points such as
consumption by category, by region, by country and so on.
6.2.4 Advocacy
72.
The IFC discovered the need to engage in policy work around inclusive
businesses only recently through the G20. In its latest summit in Turkey in 2015, leaders
endorsed the G20 IB framework and issued a call to action to all public and private sector
stakeholders to advance the cause of inclusive businesses. Further, it aims to enhance the
evidence base by examining challenges, success factors and impact of inclusive
This section is taken from the IFC Market Insights Team’s publicly available case studies on Nicaraguan
farmers and Cocoa farmers in Cote d’Ivoire.
58 As listed on the website, as of April 2016
59 http://datatopics.worldbank.org/consumption/
57
35
businesses, and drive policy conducive to inclusive businesses by undertaking national
outreach to stakeholders. IFC, together with the UNDP, is helping the Chinese government
in convening the inclusive business agenda for the G20 summit in 2016.
73.
In addition, the IFC is also trying to influence World Bank to take the lead on the
public sector advocacy, under the one bank initiative.
6.2.5 Innovative financing instruments – IFC’s Inclusive Business bonds
74.
Innovative Finance for Innovative Businesses. IFC was the first and continues
to be the only development bank to run an IB bond program. The IFC developed
inclusive business bonds (AAA rated) to provide external investors from the private sector a
low risk method to invest in inclusive businesses that involve BoP in their value chain. In
2014, IFC launched the world’s first ever IB bond issued under IFC's general bond program,
and raised USD 75 million, for a 4 year maturation period, with Japanese institutional and
retail investors being the primary shareholders.60 The currency of issuance was the Brazilian
Real and the bonds are slated to mature by Oct 2018. Another round of funding raised
Mexican Peso 1,500,000,000 (approximately USD 100 million) for a 5 year maturity period.61
Following that, in 2016, they raised USD 85 million in Brazilian Real for a 3 year bond.62
Figure 15: IFC IB bond issues
175
Second close
100
First close
75
86
2014
2016
Note: (1) National amounts for the 2016 numbers are of capital raised till Apr 2016. (2) Data to be
vetted further by IFC.
75.
IB bonds is a commendable effort that underscores IFC’s commitment to
supporting inclusive businesses. Capital raised through IB bonds is segregated in a
special account for the dedicated use in IB deals by the investment teams. This implies that
there is not only institutional commitment but also the necessary ground work and operations
capability to identify and classify IBs and report impact generated, once the deal is closed.
60http://ifcextapps.ifc.org/ifcext/pressroom/ifcpressroom.nsf/0/30143E7D5B43D09785257D800070D2F2?OpenDo
cument
61http://ifcextapps.ifc.org/ifcext/Pressroom/IFCPressRoom.nsf/0/E56F9C58E0FBB01985257DAF00620C7B?ope
62
ndocument
IFC Launches Bonds to Support Inclusive Businesses in Emerging Markets, Daiwa Securities Group Japan
36
6.2.6 Institutionalization
76.
The IFC has a dedicated IB team within the Development Impact team. The IB
team was instituted in 2010 with strategic commitment from the bank. The team currently
has 12 experts, with 2 leadership positions and 10 operations and consulting team
members.
Figure 16: Inclusive Business teams within the IFC
Global Client
Services
Other
teams
President
Industry focused teams (e.g. Financial
Institutions or Manufacturing,
Agribusiness, & Services)
Corporate Risk &
Sustainability
Treasury &
Syndications
AMC Services
Regional teams (e.g. West & Central
Africa or South Asia)
Client Coverage
Climate Business cross-cutting area
Cross Cutting Advisory Solutions
Office of Chief Economist
& Development Impact
Knowledge Management
& Learning
Business Communications
Inclusive Business Operations
Source: IFC Organization chart
77.
The inclusive business team works in tandem with the investment teams
supporting them at various stages of deal closing.
 Project concept. In this stage, investment teams may or may not have flagged
projects in IFC’s internal system as inclusive business. The inclusive business
team reaches out to investment teams to raise awareness and improve accuracy
of inclusive business identification.
 Appraisal. Investment teams collect company information relevant to the
inclusive business scope, post discussions with the inclusive business team at
the project concept stage.
 Board approval. If it is still unclear whether certain projects are inclusive
business at this stage, the IB team reaches out to the investment team to ask for
missing information. The inclusive business team makes the final call on which
projects are inclusive business and should be reflected as such in IFC systems.
The IB team developed a series of sector specific guidance notes with a set of
proxies for each sector for internal use to eliminate ambiguity and facilitate the
classification process. For example, an average farm size of less than 5 hectares
is one indicator used to determine whether a farmer is part of BOP.
 Supervision. The inclusive business team reports on other inclusive business
companies, including through publications and case studies.
37
78.
Working with the World Bank. IFC the Global Head for Inclusive Business for both
the IFC and the World Bank. The World Bank has been less active so far in promoting IBs.
The IFC’s Inclusive Business team has been working with the World Bank, and one of the
first initiative where the IFC and the World Bank staff are joining hands is in driving of G20.
The World Bank has repeatedly expressed interest in learning from other Development
Banks such as the ADB on carrying out public sector work.
6.3 ADB: Quickly catching up with a unique two pronged
approach
79.
The Asian Development Bank (ADB) began its inclusive business initiative in
2011. Initial operations included conducting market scoping studies in 10 Asian economies,
preparing an impact assessment tool, and due diligence for two proposed IB investment
funds for Southeast Asia and South Asia. It also partnered with key promoters in the IB
space, including IDB, IFC, impact investors and selected banks, development partners, and
the WBCSD. In 2013, ADB conducted a retrospective assessment of the PSOD portfolio
2000-2012 and found that only 5% of all deals could be classified as IB, with an average of
one project per year.
80.
ADB’s work on inclusive business has gathered steam since 2014 with
establishment of a technical assistance project. In December 2013, the Board of
Directors of the ADB approved a regional technical assistance project to upscale IB in the
bank. This was jointly financed by the government of Sweden (USD 3 million), Credit Suisse
(USD 0.1 million), and ADB (USD 0.4 million). The TA aims at (a) increasing the number of
IB deals in ADB’s Private Sector Department (PSOD) and helps financing pre-and postinvestment support for such projects; (b) developing and harmonizing in Asia impact
assessment and doing ex-ante impact assessment of PSOD financed IB deals; (c)
supporting policy work around inclusive business in various Asian countries; and (d)
generating knowledge work and building partnerships on IB.
6.3.1 Investments
81.
Since 2013, ADB has invested over USD 0.5 billion in 15 inclusive business
transactions. Since 2013, ADB invests 5-6 IB deals a year since 2013, up from only 1 per
year in the 2000-2012 period. This represents about 15-20% of its non-sovereign deals
conducted. The median deal size for an IB investment is USD 20 million.
38
Figure 17: Share of IB investments in overall investments at ADB
26%
18%
17%
14%
12%
4%
11%
10%
5%
5%
2000-2012
FY 13
FY 14
% IB deals/Non sovereign investments (by value)
FY 15
Mean
% IB deals/Non sovereign investments (by number)
Note: (1) The number of projects have been sourced from ADB’s financial reports; quantum of
investments have been sourced from the annual report (3) Mean is computed only for the period 2013
- 2015
Source: 2014 Annual report and financial report, and other internal documents
82.
India receives the highest investment flow for inclusive business deals from
ADB. India is a clear leader, both in terms of total capital deployed as well as the total
number of inclusive business deals. India is followed closely by Azerbaijan in the number of
deals and the balance is split between six countries only. Hence, ADB’s investments are
present only in about 18% of all countries in Asia. This distribution is a result of (1) high
incidence of bankable inclusive businesses in South Asia (particularly in India) and (2) the
regional priorities of individual project officers.
Figure 18: Distribution of ADB’s IB investments by country
40%
27%
22%
20%
13%
13%
7%
India
Azerbaijan
Cambodia
8% 7%
Indonesia
6% 7%
Pakistan
% by value
5%
Georgia
3%
7%
India
+ Cambodia
7%
2%
Tajakistan
7%
1%
Bhutan
% by number
Note: For the period 2013 - 2015
Source: Internal documents
83.
ADB’s inclusive business portfolio is heavily skewed towards financial markets
and the microfinance sector. Financial markets and microfinance, agriculture and forestry,
and utilities contribute to about 90% of the portfolio by value (see figure 19). This is highly
skewed when compared with IFC and the IDB (figure 8 and 13). This highlights potential
opportunities that the ADB can tap, specifically inclusive businesses in education, energy
and health.
39
Figure 19: Sectoral distribution of ADB’s IB investments
78%
53%
27%
13%
8%
7%
7%
1%
Financial markets
(incl. MFIs)
Agribusiness
and forestry
Utilities/
Infrastructure
% by value
Transport
7%
0%
ICT
% by number
Note: For the period 2013 - 2015
Source: Internal documents
6.3.2 Technical Assistance for Inclusive Businesses
84.
ADB’s technical assistance to IBs is limited but focused. The use of technical
assistance in supporting non-sovereign operations in ADB is generally limited. The total TA
as a percentage of all private sector operations is about 0.3%63 of total non-sovereign
investments, amounting to only USD 5 – 6 million/year. As a result, the amount of TA
available for inclusive businesses solely through ADB is very limited. However, the current IB
facility allocated about USD 1.0 million for pre and post investment support, and USD 0.5
million for impact assessment. Another source of TA funds is from other sectors funds such
as climate change. For example in 2015, the ADB supported Mountain hazelnut with USD
1.2 million technical assistance grant – USD 0.2 million was funded from the IB TA facility.
This available funding is not sufficiently utitlized given the low number of inclusive business
deals. ADB partners with other organization to co-finance some TA facilities with very
specific objectives. For example, in 2013, ADB approved a new TA project that was cofinanced by the Government of Sweden, Credit Suisse and ADB’s TA special fund. As part
of this project, the investment officers can carry out ex-ante impact assessment of inclusive
business projects. Under this TA, ADB also sponsors due diligence for the potential inclusive
business investees.
6.3.3 Knowledge work and Partnerships
85.
ADB has rapidly become the knowledge frontrunner on IB in the region. The
bank has published numerous (over 20) studies in a very short time frame which were
pioneers in IB knowledge. ADB’s knowledge work64 has focused on;
 Market scoping studies for Bangladesh, Indonesia, India, Mekong region,
Pakistan, Philippines, Sri Lanka, Vietnam, covering the potential for IB
investments, key models and challenges, a first of its kind
63
64
The same fraction is five times higher for IFC at ~1.5%
http://www.inclusivebusinesshub.org/page/inclusive-business-in-the-asian-development-bank-adb#History-ofIB-in-the-ADB
40






Sector studies such as finance (in cooperation with Credit Suisse; for 2015),
apparel industry (in cooperation with IB Sweden) etc.
Company case studies, such as Rocky Mountain (coffee - PHI), Nestle (coffee PHI), Kennemer Foods (cacao - PHI), Akay (spices - IND/CAM), and more than
20+ IB companies in Philippines as part of its accreditation work.
Impact assessments: review of impact assessment tools available globally,
suggestion for ADB impact assessment tool, self-rating tool for companies,
primer on doing impact assessments for IB (I/2015).
Thematic studies such as Inclusive Businesses and gender, Role of development
banks in supporting inclusive businesses, Social enterprises as future inclusive
businesses, Strategic CSR for inclusive businesses.
IB accreditation and public sector support: ADB has developed an accreditation
sysem that can be used by governments for identify inclusive businesses from
other traditional businesses and then link incentives and industrial policy reforms.
Creating alignment on internal strategy through studies on IB portfolio analysis of
ADB's private sector operations (2013) and (2)What can Asia learn from Latin
America and ADB from IDB (2013).
86.
ADB recognizes the importance of partnerships. From the initiation of IB at ADB,
it engages in various partnerships, especially with development institutions (IDB, DFAD,
DFID, IFC, KfW, GIZ, AfD, FMO, SIDA, SECO) impact investors (LGT, Bamboo Finance,
responsibility, AVPN) and banks (Credit Suisse, JP Morgan, Standard and Poors, Deutsche
Bank), business associations (WBSCSD and the Philippines Business for Social Progress
(PBSP), and others players such as CSR Asia, BoP-Hub, IBAN, ASEI, Dalberg Global
Development Advisors etc.
6.3.4 Public sector engagement
87.
ADB’s work on sovereign projects is unique amongst all Development Banks.
ADB is currently the only development bank with a holistic approach to promoting inclusive
business not only through private sector investments and knowledge work, but also through
public sector support for inclusive business. In particular, the ADB advocates through
accreditation, target setting, including inclusive business features in industrial policy reforms,
technical assistance support and designing public sector financing support programs for
inclusive businesses such as risk guarantees, IB/SE funds, equity through Islamic finance
and other tools. This approach to foster new public-private partnerships as well as
knowledge exchange around the needs of inclusive businesses is to be further grounded in
an increase of sovereign IB investment projects. In the Philippines, for example, ADB is
supporting the government to set up an IB accreditation system and helps with
recommendation for policy alignment. The ADB’s regional departments are also in talks with
a number of governments including Indonesia, Pakistan, PRC, Vietnam, Myanmar and
Tajikistan to include inclusive business components in public investment projects. The banks
inclusive business policy work can take the following forms - sovereign ADB investments,
funding for accreditation, inclusive business incubation, and transaction support. In some
cases, support can also be linked among others to a second loss risk guarantee, and to the
Islamic Finance mechanism for transaction support.
6.3.5 Institutionalization
88.
Inclusive Business in Strategy 2020 Update: Following the mid-term review of
Strategy 2020, in May 2014, on the personal request of ADB President Takehiko Nakao,
Inclusive Business was included in ADB’s strategic priorities for 2014-2020. The strategy
41
review states that “… ADB will increase its support to businesses that are financially viable,
generate high development impact and provide services to the poor (inclusive business).
ADB will also replicate successful inclusive business models from other regions. More TA
may be provided, and the use of concessional Asian Development Fund resources to
support inclusive businesses will be explored. ADB will prepare an action plan to identify
measures needed to support inclusive business, including improvements needed in its
business processes…..”.65
89.
Inclusive Business is coordinated by champions dispersed in various
departments. ADB’s inclusive business initiatives are coordinated through the Social
Development, Governance and Gender Division. Investments (sovereign and private sector)
are driven through individual staff within the Private sector and co-financing operations
department and the Operations 1, and 2 department, in alignment with their own sector66 or
country focus.
Figure 20: Inclusive Business teams within the ADB
Other
teams
President/CEO
Investment Teams within the
Private Sector and Cofinancing Operations
department
Knowledge Management &
Sustainable Development
Operations 1 and 2
(sovereign operations)
Regional and Sustainable
Development Department
Social Development,
Governance & Gender Division
Inclusive Business Operations
Source: http://adb.org/sites/default/files/ADB-org-chart.pdf
6.4 Bilateral development banks are willing to set up
inclusive business lines
6.4.1 DFID/CDC67
90.
DFID has a two pronged approach towards Inclusive Business. To ‘deliver
results for the poor and transform the business environment’.68 It seeks to do so by
engaging with firms directly and indirectly so that they generate more jobs, income
opportunitiesand services for poor people and by improving the business environment.
91.
DFID works in close cooperation with the CDC, its private sector arm. In 2012,
DFID launched the DFID Impact Fund, which is managed by the CDC. The Impact Fund is a
ADB (2014), “Strategy 2020 Update (Midterm Review of Strategy 2020: Meeting the Challenges of a
Transforming Asia and Pacific)”
66 Sector focus of PSOD officers - Infrastructure, Finance and capital markets, Environmental protection,
Sustainable agriculture, Education and Health - aligns well with the sectors in which IBs are usually found.
67 CDC is UK’s Development Finance Institution (DFI) wholly owned by the UK Government
68 DFID (2011), “The engine of development: The private sector and prosperity for poor people”
65
42
GBP 75 million (approx. USD 108 million) fund of funds that invests in intermediary funds
that provide financing to social enterprises or inclusive businesses. To allow CDC to make
direct investments into inclusive businesses, the DFID Impact Acceleration Facility was
approved in 2014. This USD 58 million69 facility provides up to a 1:1 fund matching for the
existing CDC clients to pursue inclusive initiatives. Traditional businesses are financially
supported to pilot inclusive initiatives that can lead to large scale impact.
92.
It has also launched several challenge funds aimed predominantly at social
enterprises. Some of the examples are:
 The Responsible and Accountable Garment Sector Challenge Fund (GBP 2 – 10
million) aims at improving the working conditions in garment production industries
supplying the UK market.70
 The Food Retail Industry Challenge Fund (FRICH) (GBP 2 – 10 million) invests in
supply chain development to improve the livelihoods of African farmers.71
 The Vietnam Business Challenge Fund (~ GBP 6 million) invested in innovative
small scaler IB models that deliver both commercial benefits for the company and
social impact for the low income population.72
 The Africa Enterprise Challenge Fund (over GBP 10 million) offers grants and
loans on a competitive basis to private companies to support new and innovative
business initiatives that benefit the poor in Africa.
 DFID is currently exploring to setup a GBP 10 million fund to help multi-national
companies develop inclusive business investments
6.4.2 FMO, the Netherland’s Development bank
93.
FMOs activities related to social enterprises and inclusive businesses are so
far targeted towards traditional SMEs and MFIs through intermediaries. FMO believes
that ‘…long-term profit and viability must go hand in hand with enduring economic and social
impact’.73 In this regard, it is trying to build up its inclusive business practice. Current
activities focus primarily on SME and MFI financing as a financial intermediary, and is mainly
built around government funds. FMO’s new commitments for government funds amounted to
Euro 184 million in 2015 and its investments in MFI institutions amount to Euro 88 million in
2015.
94.
Increasingly, it is piloting investing directly in inclusive investments from its
own balance sheet. These investments are meant to benefit people at the BoP. Its
investment Orb Energy, an Indian company providing off-grid solar energy solutions in
Kenya, in partnership with the AEF fund, is an example. Similarly, it signed a transaction with
the Small Enterprise Foundation, a Euro 2 million facility from the MASSIF fund, aimed at
supporting South African female entrepreneurs. Another example is the Peruvian Financiera
Confianza, a large microfinance institution, which will on-lend FMO’s Euro 18 million facility
to poor rural households and small companies.74
69
http://www.cdcgroup.com/How-we-do-it/Types-of-capital/diaf/
70
https://www.gov.uk/responsible-and-accountable-garment-sector-challenge-fund
https://www.gov.uk/food-retail-industry-challenge-fund-frich
71
72
http://www.vbcf.org.vn/en/node/71
https://www.fmo.nl/sustainability
74 FMO 2015 annual report
73
43
95.
FMO has expressed interest in setting up a strategic unit, with a structure in
which the inclusive business team sits at the strategy level and coordinates work with the
public and the private sector teams.
6.4.3 AfD/PROPARCO, the French Development bank
96.
AFD group set up a “social business” strategy in 2015. PROPARCO has
identified developing their social business offer by funding more companies active in the
inclusive economy as one of the 10 strategic goals for the period 2014 – 2019.75 AfD is also
active in the inclusive business advisory group of development banks.
97.
AFD has invested USD 8 million in the USD 50 million Essential Capital
Consortium, a social impact fund created by Deutsche Bank, a first for AFD.76 The fund
provides loans to social enterprises working in developing and emerging countries in the
energy, health and financial service sectors, which provide goods and services that improve
the lives of the poor.
6.4.4 KfW/DEG, the German Development Bank
98.
KfW has made only two fund investments related to inclusive businesses. In
2013, KfW invested USD 10 million77 in the USD 94 million Aavishkaar, a venture capital
fund that targets social enterprises (and some inclusive businesses) in India, Indonesia,
Pakistan and Sri Lanka.78 KfW also provided a Euro 2.4 million technical assistance grant to
the project. Previously, it has invested in one inclusive business investments in Africa.79 KfW
also supports social enterprises through its investment loans for Municipal and Social
enterprise program. Municipalities, as well as municipal and social enterprises, receive lowinterest loans to finance their investments in boosting energy efficiency.
99.
DEG, the private sector counterpart of KfW has made selective investments in
microfinance institutions that could qualify as inclusive business investments. However, it
does not have a clearly stated strategy on supporting inclusive businesses so far. However,
they are interested in expanding their knowledge and investments in this field.
6.5 In sum, multi-laterals are leading while bi-laterals are
increasingly looking at partnering
100. Table 5 summarizes the approach and activities of different DBs across investments,
sectoral distribution, institutional setup, TA and knowledge work. The key takeaways from
the table are:
 IFC is the clear leader in the number of inclusive business projects and the sum
of capital deployed.
 IDB has built extensive experience in investing in smaller inclusive business
deals in Latin America, which is unique amongst development banks.
75
PROPACO 2014 annual report
AFD 2014 annual report
77 https://www.kfw.de/KfW-Group/Newsroom/Press-Material/Themen-kompakt/ADB-Jahrestagung/
78 http://www.livemint.com/Companies/FCchE9bDB39lHXvgKpsINP/Aavishkaar-raises-94-million-from-KFW-andothers.html
79https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/News/NewsDetails_235136.html
76
44





ADB is the only bank whose inclusive business initiatives span private and public
sector operations.
Bilateral development banks of Germany, France and UK are also investing in IB,
but at a much smaller scale.
Investments in financial markets (including MFIs) are the most common.
ADB is the only bank which does not have an official inclusive business anchor.
Bi-laterals are well placed to leverage grant capital to increase TA to inclusive
businesses.
Table 5: Comparison of IB activities of different DBs
Investments
Year
# of IB projects
annually
Percent of IB in total
portfolio per year (by #)
Capital invested in IB
projects per year (USD
million)
Percent of IB in total
portfolio per year (by
USD)
Average IB deal size
Top sectors of investments
Institutional setup
Strategic alignment
Presence of official
institutionalized anchor
Investments
Coordination and
validation
Technical support to IB
companies
Knowledge work's primary
focus
Policy work
IADB
IFC/WB
ADB
2007 - 2014
9
2008 - 2015
53
2013 - 2015
5
18.0%
12.0%
6.0%
65
1383
189
3.5%
9.7%
10.4%
7.2
(1) Financial
markets (incl. MFI)
(2) Education,
Health and Housing
(3) Agribusiness
26.3
(1) Financial
markets (incl. MFI)
(2) ICT
(3) Agribusiness
Yes, strong
presidential
mandate
Yes
Institutionalized
Updated in Strategy
2020
Yes
No
Extensive
(1) BoP
Opportunity/Market
(2) Landscape
studies
(3) Case studies
Not yet but
interested
Separate IB team in
IFC
Active
Very little presence
in the IB investment
space. Most bilaterals have only
recently begun to
establish their IB
practice.
20
(1) Financial
Primarily financial
markets (incl. MFI) markets and support
(2) Agri business to social enterprises
Pre 2016: OMJ
Done in normal
Done in normal
Now integrated in IIC investment divisions investment divisions
Unclear
Bilaterals
IB coordinator in
SDCC
Some through IB
faicility
Not applicable as
most are in the
process of setting
up the IB practice
High availability of
grant capital
(1) BoP
(1) Market studies
Consumption
(2) Sector studies
database
(3) Impact
(2) Case studies
assessment and IB
(3) Advocacy (G20)
accreditation
(4) Thematic studies
(5) Policy work +
enabling
environment
Not yet, but
interested
Actively promoting
None
Not yet
Note: Average deal size for ADB is reported as the median, given the incidence of outliers
45
7 RECOMMENDATIONS FOR DEVELOPMENT BANKS
TO ACCELERATE THE INCLUSIVE BUSINESS
AGENDA
101. Development banks have recognized the importance of inclusive businesses in
achieving their mandate. In order to promote inclusive businesses, development banks
have adopted different strategies as observed in section 6. They have seen early signs of
success - collectively, they (IDB, IFC, and ADB) have cumulatively deployed more than USD
13 billion over the past few years, and form the biggest investor group for impact
investments globally. Furthermore, they are also seen as knowledge leaders within the
space.
102. However, there are several challenges that constrain the growth of inclusive
businesses (as seen in section 3). Development banks are uniquely placed to support not
only individual inclusive businesses but also the broader ecosystem. In the following section,
we outline various action steps for development banks80 that can help accelerate
development of the inclusive business space.
7.1 Institutionalize
business focus
inclusive
business
as
a
strategic
103. Inclusive business should be promoted within development banks as a
strategic business focus. While there is a lot of interest in inclusive businesses, there is
little official support available in multi and bi-lateral development banks81. It is important to
formally recognize inclusive businesses as a focus area that is key to realizing the mandate
of development banks. This will expedite mainstreaming and accelerate deal making by
creating the necessary incentives for teams across organization levels.
104. Mainstream investment operations in current private sector and sovereign
teams. Inclusive business operations should be conducted within the current operating
structure of the banks. Inclusive business sectors closely align with the sectors in which the
private sector and sovereign teams work, such as agriculture, health, financial services,
utilities etc. Furthermore, IDB’s OMJ experience has shown that the most effective deal
sourcing and preparation is through the networks of its investment officers in the regular
investment teams. Similarly, ADB has been working with the governments on promoting
inclusive businesses through its regular public sector team. Hence, it is beneficial to keep
the investment operations focused within the current teams.
105. Establish an institutionalized independent anchor that breaches both private
and sovereign operations. An institutional anchor steers new thinking on inclusive
business, is responsible for measurement, evaluation and reporting, creates knowledge and
partnerships, and represents the development bank’s work with internal and external
stakeholders. Furthermore, the anchor’s responsibilities should cut across both private and
sovereign operations. This anchor’s operations should be independent of private and
sovereign teams as it will ensure that there is an objective evaluation of the progress made.
Figure 21 pictorally depicts this set up in which an independent anchor works with the
current private and sovereign teams to promote inclusive businesses within the development
bank.
80
These recommendations have been written for the broader multi-lateral and bi-lateral development banks. It is
possible that some of these recommendations are more applicable to one development bank than the other.
81 IFC and IDB are an exception
46
Figure 21: Suggested team structure for promoting inclusive businesses
Operations team
(private sector)
Operations team
(sovereign)
Inclusive business
team
IB Anchor
Source: Noun project for icons
106. Provide incentives for staff working on inclusive business projects. The banks
should establish special reward mechanism (beyond financial incentives) for staff processing
inclusive business projects, such as public naming and recognition of their work,
participation in special inclusive business training and exposure, and additional
administrative assistance during processing of inclusive business projects.
7.2 Private sector operations team should set up clear
targets
107. Private sector operations should commit to targets based on number of
inclusive business deals. Inclusive business projects should have separate monitoring
from value based investment targets, by emphasizing the number of deals. Note that
inclusive business deals are typically small (between USD 5 and 30 million) and smaller than
average private sector deals (USD 50 -100 million). Setting private sector targets should
therefore not be done based on value but based on number of projects. A target of 10-20%
of all private sector investments in a year seems feasible based on the current track record
of development banks.
108. Create a viable inclusive business pipeline by engaging with potential
companies. In order to achieve the targets, the private sector teams will need to create a
viable pipeline. As has been the experience of impact investors and IFC, it might be difficult
to simply “find” larger inclusive business deals; rather it takes committed, innovative and
patient cooperation between the development bank and the company (and often also the
business environment in which such projects are placed) to “make” such deals. For example,
IFC engaged with Manila Water for 3 years before they could make the investment. There
are two ways in which deals can be made:
 Find new inclusive business investment opportunities in smaller and
medium sized companies. Focus on preparing deals with organizations that
were primarily set up with the objective of including the poor in their core
operations. Hippocampus Learning Centers, an ADB investee company in India
which has developed a low cost system for delivering education curriculum and
Bayport Colombia, an IDB investee company in Colombia which specializes in
47
loans repayable via payroll deduction for BoP employees in rural areas, would be
examples of such organizations.

Find inclusive business components in large deals. Emphasis should be laid
on adding inclusive elements in the structure of traditional large deals in sectors
such as agriculture, health, housing etc. For example, IFC was successful in
converting its USD 70 million investment in Manila Water (Philippines) into an
inclusive business deal. The investment was succeeded by a USD 3 million
capacity building grant to develop an appropriate inclusive business model with
the company that so far had never done work in the BoP market. In the noninclusive business space, this practice is commonly adopted by development
banks for several of their other thematic focus. For example, ADB regularly
enforces conditions that enforce conditions to promote gender equality. For
example, ADB’s Ho Chi Minh City Mass Rapid Transit Program82 in Vietnam was
designed with the gender features such as target of 20% construction and 30%
station jobs for women; dedicated waiting spaces for women on platforms, shop
spaces for female-owned businesses, among others.
7.3 Sovereign operations should take a three pronged
approach
109. Promote inclusive business as a component in policy loans. Development
banks’ close relationship with the governments is an opportunity to enforce inclusive
business components in the policy loans. Governments can set targets for the private sector
such as job creation. The achievements of such targets can then be supported by aligning
government support programs to inclusive business investments. This is common practice
across development banks and has been carried out for a number of thematic areas such as
gender, climate change etc. For example, ADB approved its first policy based loan of USD
300 million to China to help address the problem of air pollution in the capital region in
support of the Hebei Clean Air Action Plan 2015-16. “With ADB’s support, Hebei is making
fundamental reforms in its energy and socioeconomic policies and establishing a solid basis
for incremental reforms and investments in improving air quality and public health”.83
Similarly, IB components such as job creating or sourcing from the poor can be added to
policy loans. However, setting up an efficient system for targeting IB will be a precursor to
executing on the conditions.
110. Drive accreditation of inclusive businesses. Governments will require support in
accrediting businesses that are truly inclusive. Inclusive business projects need to be
accredited and such projects/companies need to be singled out against other companies. It
is here that development banks can pitch in. For example ADB, as outlined in section 6.3.4,
has been working closely with the government of the Philippines for an IB accreditation
system. It is recommended that regional departments explore the interest of government in
IB accreditation during their policy discussions and plan small scale technical assistance or
staff consultant for accreditation support.
111. Drive inclusive businesses through specific projects. Development banks can
work with the governments to provide financial assistance for specific projects. One such
project which has the potential to create a pipeline of inclusive business deals is setting up of
82
83
Gender Equality, Bridging the Gap, ADB
http://www.adb.org/news/first-adb-policy-based-loan-prc-supports-air-pollution-control-beijing-capital-region-0
48
an social enterprise challenge fund,84 which is aimed at supporting social enterprises, which
have commercially viable and systemic impact models, to scale up.
7.4 Anchor cell should lead knowledge work, partnerships
and M&E
7.4.1 Knowledge work
112. Sustain momentum on knowledge creation. Development banks regularly create
knowledge products such as BoP consumer survey, inclusive business case studies, market
landscapes, thematic studies etc. They are already considered knowledge leaders in their
respective geographies. However, a quick analysis of the knowledge products shows that
there is a need to increase studies on the role of public sector in promoting inclusive
businesses as well as creating ex-ante and ex-post impact studies. This would also require
that funds are dedicated for creating knowledge work on inclusive businesses as opposed to
the often observed current practice of gathering funds from other thematic areas or one off
funding facilities.
113. Focus on knowledge dissemination both internally as well as externally.
Knowledge dissemination is as important as knowledge creation. While there have been
some efforts by development banks to propagate knowledge through conferences and
roundtables, there is a need to do more.
 Internal. It is recommended that development banks provide further capacity
building to its staff, and management on all elements of inclusive business deal
making, particularly related to ex-ante impact assessment, vision for integrating
inclusive business in public sector projects, and risk and return perception of
inclusive business deals. This can be carried out in the form of information
seminars, short training courses and immersion programs.
 External. While business communities are increasingly aware of the principles of
impact investments, understanding of many governments is still quite lacking on
this topic. It is therefore suggested that the anchor cell in cooperation, with the
regional/country departments, conducts briefing sessions in partner countries on
inclusive business. The work of development banks in supporting regional bodies
such as the G20 and APEC are right steps in this direction.
7.4.2 Partnerships
114. Deepen partnerships between multi-lateral and bi-lateral development banks.
Multi-lateral development banks work closely with each other through formal and informal
ties. Bi-lateral development banks have also expressed interest in learning from the
experiences of the ADB, IFC and IDB. Hence it is recommended that existing modes of
partnerships be deepened and new areas for partnerships be explored.
 Formalize the development bank working group. In November 2014, ADB,
IFC, IDB, KfW/DEG, FMO, AfD/PROPARCO set up a working group to
harmonize their inclusive business work among them. There is an eager interest
in banks to learn from one another – IDB and IFC recently showed strong interest
in ADB’s non-sovereign IB work; and ADB works closely with IDB and IFC. Many
bi-laterals (AFD/PROPARCO, KfW/DEG, FMO) have expressed interest in
learning from multilaterals (IDB, IFC and ADB) to set up their own inclusive
84
ADB and Dalberg (2016), “Are Social Enterprises the Inclusive Businesses of tomorrow?”
49


business practice. It is recommended to formalize the development bank working
group by having an official rotating chair which organizes learning workshops and
ensures participation in each other’s (current and would-be) inclusive business
events (BASE forum, IB forum etc.).
Increase technical assistance by partnering with bi-lateral development
banks. Multi-laterals should explore partnerships with bi-laterals who have grant
money which can be utilized for conducting due diligence (which is generally
sponsored by the investee company presently), and providing TA to improve
business and impact outcomes. It is a mutually beneficial partnership, as this
implies higher availability of TA for the multi-laterals’ investee companies and
gives an opportunity to bi-laterals to learn from the experience of the multi-lateral
banks. An example of such an initiative is the USD 3.5 million regional technical
assistance project co-financed by the government of Sweden (USD 3 million),
Credit Suisse (USD 0.1 million), and ADB (USD 0.4 million).
Issue IB bonds in partnerships with bi-laterals. Following the success of IFC
in issuing its inclusive business bonds, it is recommended to issue similar bonds
in co-ordination with bi-laterals. Although the banks may not need additional
sources to finance their inclusive business deals, it is recommended that such a
bond be established, in order to enhance commitment and visibility.
115. Harmonizing impact assessment across the impact investment industry. Impact
investors and development banks often apply different definitions to inclusive business.
Companies often use different impact measurement tools. Most tools are monitoring tools
and are not used for ex-ante impact assessment to inform project designing. In this regard,
most development banks have developed detailed impact measurement tools for their
investment officers (see annexure 8.5 for ADB’s impact assessment framework). Hence,
there is an opportunity to harmonize the application of impact assessment across different
actors. This has the potential to lower transaction costs for the industry as a whole.
116. Create expertise in working with private sector promoting agencies such as
chambers of commerce and business councils. Traditionally, development banks’ private
sector department deals directly with individual companies (often not influencing the whole
subsector or industry) and the public sector department maintains little contact and working
relation with intermediaries such as the chambers of commerce. Industry chambers however
are influential bodies representing business interest towards government policy making.
They can be strong promoters of inclusive business approaches. For example in inclusive
business discussions in Indonesia, Myanmar, Philippines and Vietnam, the respective
business councils showed strong interest in working with ADB on the same.
7.4.3 Measurement and Evaluation (M&E)
117. Conduct independent assessment of the investment deals. Inclusive business
deals differs from traditional deals in infrastructure, microfinance and social enterprises (see
section 1). The anchor cell should use a standardized classification system based on the
impact assessment tool, to identify true inclusive business projects.
118. Publish inclusive business progress reports. Development banks should publish
a comprehensive report on how it promotes inclusive businesses in their own regions
through sovereign and private sector investments, and through knowledge work and
partnership building every 1-2 year. This report should be result oriented by describing the
social impact created and how this contributes to systemic changes on poverty and
inclusion. Furthermore, it is suggested that other standard reports such as the annual report
comprise separate chapters to report on reach, depth, relevance, innovation, and systemic
change of inclusive business investments.
50
8 APPENDIXES
List of appendixes
 Inclusive Business Definitions
 Business Call to Action
 World Business Council for Sustainable Development
 Inclusive Business portfolio of ADB, IDB, and IFC
 Inclusive Business knowledge work of ADB, IDB and IFC
 ADB’s impact assessment tool and Inclusive Business Accreditation system
 Literature list with URLs
51
8.1
Inclusive Business Definitions of Development Banks







85
ADB. Inclusive businesses are commercially viable core-business models that
provide – at scale - innovative and systemic solutions to the relevant problems of
the poor and low income people.85
BCtA. Inclusive business are core business activities that are inclusive of poor
populations and contribute to the achievement of sustainable development goals.
These core business activities should be commercially-viable business ventures
that engage low-income people as consumers, producers, suppliers, and
distributors of goods and services.86
BIF. Profitable core business activity that also tangibly expands opportunities for
the people at the base of the economic pyramid (BoP): as producers, suppliers,
workers, distributors, consumers – or even as innovators.87
G20 framework. Inclusive businesses provide goods, services, and livelihoods
on a commercially viable basis, either at scale or scalable, to people living at the
base of the economic pyramid (BOP) making them part of the value chain of
companies´ core business as suppliers, distributors, retailers, or customers.88
IDB. Inclusive business is defined as the development of commercially viable,
mass market and/or supply chain strengthening solutions that deliberately
expand access to goods, services, and income and employment opportunities for
people living near or at the base of the pyramid.89
IFC. Inclusive business is a private sector approach to providing goods, services,
and livelihoods on a commercially viable basis, either at scale or scalable, to
people at the base of the economic pyramid by making them a part of a
company’s core business value chain as suppliers, distributors, retailers, or
customers.90
WBSCD. Sustainable business solutions that go beyond philanthropy and
expand access to goods, services, and livelihood opportunities for low-income
communities in commercially viable ways.91
http://www.inclusivebusinesshub.org/page/ib-asia-definitions
http://www.businesscalltoaction.org/about/
87 http://www.inclusivebusinesshub.org/profiles/blogs/5132225:BlogPost:50706
88 G20 Development Working Group (2015), “G20 Inclusive Business Framework”
89 http://www.iadb.org/en/topics/trade/inclusive-business-bringing-innovation-to-low-income-markets,8901.html
90 IFC (2015), “Inclusive Business at IFC - How IFC approaches and defines Inclusive Business”
91 http://www.inclusive-business.org/inclusive-business.html
86
52
8.2
Business Call to Action
8.2.1 Introduction
The Business Call to Action (BCtA) is a multilateral alliance that encourages companies to
advance core business activities in a way that is more inclusive of poor populations and
contribute to long-term sustainable growth in the countries that it operates in. The alliance
was formed between key donor governments including the Dutch Ministry of Foreign Affairs,
Swedish International Development Cooperation Agency (Sida), UK Department for
International Development (DFID), US Agency for International Development (USAID), the
Ministry of Foreign Affairs of the Government of Finland, and other United Nations’ bodies
such as the United Nations Development Programme, and the United Nations Global
Compact, and Opportunities for the Majority of the Inter-American Development Bank.
Currently, 137 companies have responded to BCtA’s challenge.
8.2.2 Objectives
BCtA members have committed to accelerate the process of meeting 13 of the 17
Sustainable Development Goals by 2030 as defined in “Transforming Our World – the 2030
Agenda for Sustainable Development”. These goals are:
2) End Poverty: 3 million with increased access to financial services
3) End Hunger: 6.2 million farmers experiencing better agricultural yields and 1.6
million people with improved nutrition
4) Good Health: 113 million people with improved health outcomes
5) Quality Education: 4.6 million people receiving training/education
6) Gender Equality: 10 million women with increased productivity/revenue generating
activities
7) Clean Water and Sanitation: 1.8 million people with improved access to water
and .8M people with improved access to sanitation
8) Clean Energy: 67 million people with improved access to energy
9) Good Jobs and Economic Growth: 6.3 million full-time jobs created
10) Sustainable Cities and Communities: 42 million people experiencing improved
living conditions
11) Protect the Planet: 197 million tons in greenhouse gas reductions
8.2.3 Activities
As a global leadership platform, BCtA creates opportunities to:
 Share expertise, knowledge, and best practices for market-based approaches to
development
 Provide development advice and assistance to member companies
 Create linkages with other companies, donors, and key stakeholders involved in
the inclusive business space
8.2.4 Distribution of members
As shown in figure 22, majority of BCtA’s companies are still large multinational corporations
but BCtA believes there is a growing interest from national companies too who are looking
inwards to develop the country’s economy more sustainably. 61% of new members in 2014
were headquartered in emerging markets such as the Philippines and Kenya. As shown in
53
figure 23, these companies operate in multiple industries with financial services, and food
and beverage being the most popular.
Figure 22: Distribution of BCtA's companies by type in 2014
41%
27%
20%
12%
Large
Multinational
Companies
Small and
Medium
National
Companies*
Small and
Large National
Medium
Companies
Multinational
Companies*
Note: (1) SMEs are defined as 500 employees or less
Source: BCtA Annual Review 2014
Figure 23: Distribution of BCtA's companies by industry in 2014
26%
18%
15%
15%
10%
9%
7%
Financial
Services
Food and
Beverage
Healthcare
ICTs
Energy
Household
Products
Others
Source: BCtA Annual Review 2014
8.2.5 Impact
In 2014, BCtA’s initiatives by its members reached 40 million households and 200 million
people. Of 47 companies polled, 23% have reached “several million” beneficiaries while 15%
have reached “around a million” beneficiaries. This is reflected in figure 23 below.
54
Figure 24: Number of beneficiaries of member companies
26%
23%
19%
17%
15%
12
11
7
Several million
Around
a million
8
9
Up to 500,000 Up to 100,000 Hundreds or a
few thousand
Note: (1) Data was collected from a poll involving 47 member companies
Source: BCtA Annual Review 2014
55
8.3
World Business Council for Sustainable Development
8.3.1 Introduction
The World Business Council for Sustainable Development (WBCSD) is a CEO-led group
made up of forward-thinking companies that galvanises the global business community to
create a sustainable future for business, society and the environment. The council aims to
generate constructive solutions and take shared action to drive business action on
sustainability through the application of its respected thought leadership and effective
advocacy. Member companies are represented in the council by their CEOs or a board level
executive. There are a total of 184 member companies headquartered in Africa, Asia,
Europe, and Latin America. They leverage a global network of 65+ independent national and
regional business councils and partner organisations including Accion RSE Chile, New
Zealand Sustainable Business Council, Council of Great Lakes Industries, The Excel
Partnership, Centre for CSR Development Ukraine, econsense in Germany, Confederation
of Indian Industry, and the National Business Initiative in South Africa.
8.3.2 Objectives
As a coalition of companies committed to the principles of sustainable development,
WBCSD has set out objectives in 5 areas:
1) Business Leadership: To be a leading business advocate on sustainable
development
2) Policy Development: To participate in policy development to create the right
framework conditions for business to make an effective contribution towards
sustainable development
3) The Business Case: To develop and promote the business case for sustainable
development
4) Best Practice: To demonstrate the business contribution to sustainable development
solutions and share leading edge practice among Members
5) Global Outreach: To contribute to a sustainable future for all nations
8.3.3 Activities
To achieve these objectives, WBCSD has undertaken the following four actions:
1) Setting up clusters. Six clusters have been set up, each led by a Director and
governed by a Cluster Board of Council Members, to develop business solutions
such as Climate & Energy, Ecosystems & Landscape Management, Safe Materials &
Products, Social Impact, Sustainable Lifestyles and Water.
2) Setting up sector and value chain expertise. Member companies are grouped up
according to their sector or value chain expertise to identify sustainable development
business opportunities within that respective sector. There are nine sector or value
chain expertise areas - Cement Sustainability Initiative, Chemicals, Electric Utilities,
Energy Efficiency in Buildings 2.0, Food & Biomaterials Solutions, Forest Solutions,
Sustainable Mobility 2.0, Tire Industry Project, and Urban Infrastructure Initiative.
3) Developing new measures of progress. WBCSD’s new vision for 2050 is to
measure businesses by its ‘True Value’ using ‘True Costs’ and ‘True Profits’
highlighted by financial, societal, and environmental impact. To meet this vision,
WBCSD has started developing new indicators, establishing true costing of
externalities, and implementing new management and financial accounting, and
reporting standards.
56
4) Building capacity. The WBCSD Leadership Programme aims to provide future and
current business leaders with the knowledge of sustainability challenges, and
opportunities. It is designed to help leaders to make strategic decisions across the
complex interdisciplinary topics. The People Matter project was also developed to
help guide member companies in integrating sustainability into its corporate culture.
Content is articulated through business cases, seminars and thought leadership
articles.
8.3.4 Distribution of members
Member companies of WBCSD, as reflected in Figure 24 below, are fairly distributed across
the different sectors. Across geographies, approximately 50% of these companies are based
out of the Europe. 28% and 23% of the member companies are based out of Latin America
and Asia (see figure 25).
Figure 25: Distribution of WBCSD member companies by industry
9%
8%
7% 7% 7% 7%
6%
5% 5% 5%
4% 4% 4%
3% 3% 3% 3% 3%
2% 2% 2% 2%
1% 1% 1% 1%
Maritime
Real Estate
Transport
Agriculture, Food & Beverages
Media
Trading
Retail
Water Services
Logistics
Healthcare
Agriculture
Mining & Metals
Construction
Conglomerate
IT & Telecoms
Banking & Insurance
Auto
Services
Consumer Goods
Food & Beverages
Tires
Engineering
Oil & Gas
Cement
Utilities & Power
Forests, Paper & Packaging
Chemicals
0%
Note: (1) Total is more than 100% due to rounding error
Source: http://www.wbcsd.org/RootRessources/EPicture/2069/Image/membership-sector-region2.jpg
57
Figure 26: Distribution of HQ of member companies by geographic region
49%
20%
14%
9%
Europe
NAFTA
Asia
Japan
7%
Latin America
2%
1%
Africa
Middle East
Note: (1) Total is more than 100% due to rounding error
Source: http://www.wbcsd.org/RootRessources/EPicture/2069/Image/membership-sector-region2.jpg
58
8.4
Inclusive business portfolio of ADB, IDB and IFC
Inclusive business portfolio of ADB
Name
Country
Sector
Year
Investment
(USD million)
Access bank
Azerbaijan
Inclusive Finance
2015
56.3
Finca
Azerbaijan
Inclusive Finance
2015
20.0
Access Bank
Azerbaijan
Rural finance
2013
50.0
Mountain hazelnuts
Bhutan
Agrobusiness
2015
3.0
Akleda
Cambodia
Microfinance
2013
75.0
Credo
Georgia
Inclusive Finance
2015
23.0
Finca
Georgia
Inclusive Finance
2015
7.0
Hippocampus
India
Education
2014
5.0
Simpa
YES Bank (component of a
larger loan)
Champion Agro Lmt.
India
Energy
2013
2.0
India
Microfinance
2014
200.0
Indonesia
Agrobusiness
2013
18.4
East Jakarta water
Indonesia
Water
2013
44.7
Engro
Pakistan
Agrobusiness
2013
35.0
Akay
Regional
Agrobusiness
2014
16.7
Access Bank
Tajikistan
Rural finance
2014
10.0
Note: (1) ADB only started actively looking for inclusive business deals beginning 2013, (2) List may
not be exhaustive
Source: Internal ADB documents
59
Inclusive business portfolio of IDB
The following information was taken from IDB’s project database available on their website.
This list may be non-exhaustive.
Investment
Name
Country
Sector
Year
(USD million)
Riojana: Including Small-Scale
Argentina
Agriculture
2011
2.9
Producers in Argentina’s Wine Industry
LATCO: International: Boosting Poor
Bolivia
Agriculture
2011
2.2
Farm Communities in Bolivia
IDEPRO: Strengthening Value Chains
Bolivia
Financial
2011
5.0
at the Base of the Pyramid
Services
PUPA: A Head Start for Young Children
Brazil
Education
2011
3.0
From The Base Of The Pyramid
Banco de Minas Gerais: Brazilian
Brazil
Financial
2013
10.0
Microentrepreneurs Financed through
Services
Trailblazing Credit Program
Banco Gerador: Banking for the Poor,
Brazil
Financial
2011
5.0
Financing for Neighborhood Markets
Services
Center for Digital Inclusion: Increased
Brazil
ITC
2010
0.1
Access to Connectivity to the Majority
in the Northeast of Brazil
Center for Digital Inclusion: Increased
Brazil
ITC
?
0.1
Access to Connectivity to the Majority
in the Northeast of Brazil
Tenda Atacado: Transforming the Lives
Brazil
Retail
2012
10.0
of Low-Income Microentrepreneurs in
Services
Brazil
Banco de Crédito e Inversiones:
Chile
Financial
2009
10.0
Extending Financial Service through
Services
Supply Networks
Connecting Chile: Access to Affordable
Chile
ITC
2011
0.2
IT for Low-Income Households
Bayport: An Innovative Scheme Brings
Colombia
Financial
2014
15.0
Housing to Colombian Public
Services
Employees and Pensioners
Empresas Públicas de Medellín:
Colombia
Financial
2011
10.0
Expanding Financial Democracy in
Services
Colombia
Promigas: Meeting Basic Neeeds
Colombia
Financial
2013
20.0
through an Innovative Credit Program
Services
in Colombia
Comfama: Better Access to LowColombia
Housing
2013
6.0
income Homes through Innovative
Lending in Antioquia, Colombia
Credifamilia: Homeownership within
Colombia
Housing
2011
5.2
Reach in Colombia
Mucap: Tackling the Qualitative
Costa Rica
Housing
2014
5.0
Housing Deficit in Costa Rica
Pronaca: Boosting Small-Scale
Ecuador
Agriculture
2013
7.0
Farmers in Ecuador
Banco de Guayaquil: Leveraging
Ecuador
Financial
2014
6.0
Supply Chains to Enable Access to
Services
Credit in Ecuador
60
Credife: Leveraging non-banking
correspondents to bring financial
services to unbanked businesses in
Ecuador
Jardin Azuayo: Backing CommunityDriven and Community-Led Investment
in Ecuador
Banco Agrícola: Catalyzing Financing
for Microenterprises in El Salvador
Ancalmo: Sprinkles Against Anemia
Ecuador
Financial
Services
2014
40.0
Ecuador
Infrastructure
2011
3.0
El
Salvador
El
Salvador
El
Salvador
El
Salvador
Financial
Services
Health
2013
5.0
2012
1.1
Housing
2009
7.0
Housing
2014
5.0
Infrastructure
2001
10.0
Infrastructure
2012
0.3
Financial
Services
2009
10.0
Financial
Services
2012
2.0
Private
Sector
Development
Agriculture
2012
1.0
2010
5.0
Education
2011
9.0
Education
2013
10.0
Housing
2013
6.7
Infrastructure
2008
10.0
ITC
2009
0.2
Retail
Services
Agriculture
2009
2.0
2010
3.6
Housing
2012
5.0
Housing
2012
10.0
FONAVIPO: Public-private Partnership
for Low-Cost Housing Investments
Habitat for Humanity El Salvador:
Joining Forces to Finance the Road to
a Home in El Salvador
Fedecredito: Strengthening Community
El
Institutions that Support Local
Salvador
Microentrepreneurs in El Salvador
FIHIDROS: Expansion and
El
improvement of water and sanitation
Salvador
rural services in El Salvador
Banco G&T Continental: Long-term
Guatemala
Finance for Micro, Small and Medium
Enterprises
Alternative Insurance Company:
Haiti
Insurance for the Base of the Pyramid
in Haiti
Industrial Revolution II: Introducing
Haiti
High Value Apparel Manufacturing in
Haiti
Sabritas: Creating Value at the Base of
Mexico
the Pyramid in Mexico
FINAE: Opening the Door to Higher
Mexico
Education forLow-Income Students in
Mexico
Laudex: Fostering University Graduates
Mexico
through Innovative Loans in Mexico
FOMEPADE: Affordable Housing for
Mexico
Low-Income Civil Servants in Mexico
through Payroll Deduction
Mejora tu Calle: Empowerment through
Mexico
Invesment in Mexico
Pegaso Group: Rural and Semi-Urban
Mexico
Wireless Connectivity Program
Mi Tienda: Innovative Rural Supply
Mexico
Network
Corporación Agrícola S.A.: Supporting
Nicaragua
Agriculture in Nicaragua
PRODEL: Nicaraguan Families Build
Nicaragua
Better Homes and Communities
RAFCASA: Innovation to Improve
Nicaragua
Access to Social Housing in Nicaragua
61
Manduvira Cooperative: Improving
Opportunities for Organic Sugarcane
Farmers
Banco Familiar: Financial Services for
Paraguay's Informal Workers
Banco Itapua: Banking for Small
Farmers through Innovative Alliances
Electroban: Affordable Appliances for
Paraguayan Microentrepreneurs
Interfisa: Changing the Future for
Women Entrepreneurs in Paraguay
Vision Banco: A Vision for Housing
Solutions in Paraguay
Colegios Peruanos: Expanding Quality
Education in Peru
MiBanco: Strengthening Women’s
Entrepreneurship
Edyficar: Building Better Homes
through Market Synergy in Peru
Municipal Savings and Loan Banks:
Capital Strengthening and Low Income
Mortgage Lending Program for the
Peruvian microfinance system
FOPEPRO: Bridging The Financial
Divide To Reach Small Farmers
Pymecapital: Strenghthening Value
Chains in the Region
Fundación Covelo: Lighting the Way
out of Poverty
Vision Spring: Micro franchising for the
Base of the Pyramid
Global Partnerships
Paraguay
Agriculture
2012
3.0
Paraguay
2013
10.0
2014
5.0
2013
6.0
2014
5.0
Paraguay
Financial
Services
Financial
Services
Financial
Services
Financial
Services
Housing
2011
3.0
Peru
Education
2012
15.0
Peru
2010
10.0
Peru
Financial
Services
Housing
2013
20.0
Peru
Housing
2010
10.0
Regional
Agriculture
2011
2.0
Regional
Agriculture
2012
3.0
Regional
Energy
2011
3.0
Regional
Health
2010
0.2
Regional
2010
5.0
IGNIA
Regional
2008
25.0
Corporate Leaders Program for
Success in Majority Markets
Regional
2010
0.5
Promoting Market-Based Solutions for
the Base of the Pyramid: A Project with
Endeavor Brazil
Regional
Multisector
funds
Multisector
funds
Private
Sector
Development
Private
Sector
Development
2010
0.1
Note: (1) List may not be exhaustive
Source: http://www.iadb.org/en/projects
Paraguay
Paraguay
Paraguay
62
Inclusive business portfolio of IFC
The following information was taken from IFC Inclusive Business’ case study portal. This list
may be non-exhaustive.
Name
Country
Sector
Year
Investment
(USD million)
Roshan (Telecom
Development Company
Afghanistan Corp)
Afghanistan
Telecom
2013
65.0
DineroMail
Argentina,
Brazil, Chile,
Mexico and
Colombia
ICT, fintech
2009
5.0
Brazil
Education
Not
available
39.0
Brazil
Education
2010
35.0
Ideal Invest
Brazil
Education
(loans)
2009
7.5
Companhia Energética do
Maranhão (CEMAR)
Brazil
Energy
Not
available
80.0
Tribanco92
Brazil
Finance and
training
2004
92.0
AEGEA Saneamento e
Participações S.A. (AEGEA) 93
Brazil
WatSan
2012
62.4
2007
49.0
25.0
Anhanguera Educacional
Participações S.A (AESA)
Faculdade Mauricio de Nassau
(FMN)
Duoc UC
Chile
Xiwang Sugar Holdings95
China
Education
(higher
education)
Agriculture
Alquería S.A. 96
Colombia
Agriculture
Uniminuto
Promigas97
Fundacion Cardiovascular de
Colombia
Sociedad de Acueducto,
Alcantarillado y Aseo de
Barranquilla (AAA)
Moderna Alimentos S.A.
La Hipotecaria Holding Inc. 98
Colombia
Colombia
Education
Energy
2009
Not
available
2012
2009
Colombia
Health
2012
30.0
Colombia
WatSan
Not
available
24.0
Ecuador
El Salvador
ECOM99
Global
Altobridge
Jain Irrigation Systems Ltd.
Global
India
Food
Housing finance
Agriculture
(coffee)
ICT
Agriculture
2010
2004
Not
available
2010
2007
94
92
USD 56 million in debt financing and $36 million in equity
USD 50 million in debt financing and $12.4 million in detachable warrant
94 USD 30 million in debt financing and $19 million in guarantee
95 USD 20 million in debt financing and $5 million in equity
96 USD 15 million in debt financing and $5 million in equity
97 USD 155 million in debt financing and $2 million in equity
98 USD 60 million in debt financing and $3.5 million in equity
99 Includes debt and quasi equity financing
93
20.0
8.0
157.0
8.0
63.5
154.0
8.1
76.4
63
Name
(JISL) 100
Husk Power Systems, Inc
Financial Information Network
& Operations Ltd (FINO)
Apollo Hospitals Enterprise
Limited101
Aadhar Housing Finance Pvt.
Ltd. (AHFL)
Country
2010
0.4
India
Fintech
2006
6.8
India
Health
2005
80.0
India
Housing finance
2011
4.5
2010
6.5
PT Summit OTO Finance
Indonesia
The Kenya Tea Development
Agency Ltd. (KTDA)
Kenya
Millicom103
Trustco
Butwal Power Company
Engro Foods Limited
Manila Water Company104
Coca-Cola Sabco
WaterHealth International105
Latin
America,
Caribbean
Malawi,
Mozambique
Mexico
Mexico
Middle East,
Africa
Multiple
Namibia
Nepal
Pakistan
Philippines
Regional
Regional
Dialog Telekom PLC106
SriLanka
Zain Group
Investment
(USD million)
Energy
India
Bakhresa Grain Milling Malawi
& Mozambique (BGM Malawi)
Bankaool
VINTE102
Year
India
Suvidhaa Infoserve Private
Limited
Yellow Pepper Holding
Corporation
Sector
ICT, ecommerce,
fintech
Financial
Services Motorcycles
Not
available
120.0
Agriculture
2013
12.0
Fintech, Mobile
financial network
2008
3.0
Food
2008
5.0
Agrifinance
Housing
2010
2008
Not
available
1990
2010
2010
2009
2003
2002
2002
Not
available
Telecom (MNO)
Telecom
Education
Energy (hydro)
Agriculture
WatSan
FMCG
WatSan
Telecom
1.714.0
36.8
25.0
325.0
10.8
6.5
50.0
75.0
80.0
16.2
65.0
Note: (1) List may not be exhaustive
Source:
http://www.ifc.org/wps/wcm/connect/as_ext_content/what+we+do/inclusive+business/case+studies
100
USD 60 million in debt financing and $16.4 million in equity
USD 65 million in debt financing and $15 million in equity
102 USD 12.5 million in A Loan Participation, $10 million in equity, and $14.3 million in partial credit
guarantees
103 Includes both long-term debt financing and equity
104 USD 60 million in debt financing and $15 million in equity
105 USD 10 million in debt financing and $6.2 million in equity
106 USD 50 million in debt financing and $15 million in equity
101
64
8.5
Inclusive Business knowledge work of ADB, IDB and IFC
DB
Title
Year
IFC
IFC
G20 Inclusive Business Framework and Leaders’ Call to Action
Corridors for Shared Prosperity: Spotlight on India-Africa Inclusive
Business Transfer
Landscape of Inclusive Business models of Healthcare in India:
Business Model Innovations
Impact of Efficient Irrigation Technology on Small Farmers
Shared Prosperity through Inclusive Business: How Successful
Companies Reach the Base of the Pyramid
The Role of the Private Sector in Expanding Health Access to the
Base of the Pyramid
Being the Change: Inspiring the Next Generation of Inclusive Business
Entrepreneurs Impacting the Base of the Pyramid
Policy Note on the Business Environment for Inclusive Business
Models
G20 Challenge on Inclusive Business Innovation
Accelerating Inclusive Business Opportunities: Business Models that
Make a Difference
Inclusive Business Models: Guide to the Inclusive Business Models in
IFC's Portfolio
Inclusive Business Solutions: Expanding Opportunity and Access at
the Base of the Pyramid
Scaling up Inclusive Business: Advancing the Knowledge and Action
Agenda
Developing Inclusive Business Models: A Review of Coca-Cola’s
Manual Distribution Centers in Ethiopia and Tanzania
Business Linkages: Enabling Access to Markets at the Base of the
Pyramid
Supporting Entrepreneurship at the Base of the Pyramid through
Business Linkages
Business Linkages: Lessons, Opportunities and Challenges
The next 4 billion: Market size and business strategy at the base of the
pyramid
Corporate Strategy Update: Meeting the challenges of a transforming
Asia and Pacific
2015
2015
ADB
Inclusive Business Potential at the ADB: A Preliminary Private Sector
Operations Portfolio Assessment
2013
ADB
Inclusive Business Support: Technical Assistance report for ADB's
private sector departments doing impact assessments and due
diligence on IB models financed by the ADB
Working together in pursuit of inclusive business:Sharing the Latin
America and Carribbean experience with Asia and Pacific
2013
ADB
Impact Assessment for Inclusive Business: A Self Assessment Tool
2013
ADB
Investigating the potential of an Inclusive Business Fund in
Bangladesh
2013
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
IFC
ADB
ADB
2015
2014
2014
2013
2012
2012
2012
2011
2011
2010
2010
2009
2009
2008
2007
2007
2014
2013
65
ADB
Developing the Business Case for Investing in Inclusive Business in
Indonesia
2013
ADB
Inclusive Business Study
2013
IDB
BOP Market Entry
2013
ADB
Impact assessment tools for the BoP and other types of triple bottom
line investing: Review of available tools and their relevance for ADB's
inclusive business initiative
Inclusive Business ex-ante Impact Assessment: A Tool for Reporting
on ADB’s Contribution to Poverty Reduction and Social Inclusiveness
(April 2012)
Inclusive Business ex-ante Impact Assessment: A Tool for Reporting
on ADB’s Contribution to Poverty Reduction and Social Inclusiveness
(April 2012)
INDIA AND SRI LANKA: Inclusive business market study for India and
Sri Lanka (Dec 2012)
2012
ADB
PAKISTAN: Developing the Business Case for Investing in Inclusive
Business in Pakistan (Dec 2012)
2012
ADB
VIETNAM: Establishing an Inclusive Business Private Equity Fund in
Vietnam (April 2012)
2012
ADB
THE MEKONG: Developing the Business Case for Investing in
Inclusive Business in the Mekong (Sept 2012)
2012
ADB
ADB Strategy 2020: Working for an Asia and Pacific Free of Poverty
(April 2008)
2008
IDB
A Firm-level Approach to Majority Markets Business
2008
IDB
A Rising US$750 Billion Market: Unlocking Opportunities at the Base
of the Pyramid in Latin America and the Caribbean
2015
IDB
Broadband Effect, Enhancing Market-based Solutions for the Base of
the Pyramid
2014
IDB
Many Paths to a Home: Emerging Business Models for Latin America
and the Caribbean Base of the Pyramid
2014
IDB
The Bright Side of the Poor
2014
IDB
Working Together in Pursuit of Inclusive Business: Sharing the LAC
Experience with Asia and the Pacific
2013
IDB
Using IRIS to Track Social and Environmental Portfolio Performance
accross the OMJ Portfolio
2012
IDB
Mapping the Potential of the Private Sector Nutrition Solutions in
LatAm
2010
IDB
OMJ Index: Analysis of Corporate Performance in LAC
ADB
ADB
ADB
2012
2012
2012
?
66
Note: (1) List may not be exhaustive (2) This does not include company case studies
Source: ADB, IDB, and IFC websites
67
8.6 ADB’s impact assessment tool and Inclusive Business
Accreditation system
8.6.1 Background
In order to incentivise the creation of more inclusive businesses in the Philippines, the Board
of Investments (BoI) has partnered with ADB to develop an Inclusive Business Accreditation
System. This system will serve as a tool to distinguish a good inclusive business model from
other types of business models, and allow investors to identify potential investees operating
in the Philippines. There are three reasons for having such an accreditation system:
1) Accreditation systems are important to establish trust and accountability in new
concepts as shown, for example, in the fair trade, sustainability and organic market
sector.
2) While all companies contribute to economic growth, only a few companies have
business models that make growth more inclusive.
3) For government programs and banks to better target investment support, there is
need to distinguish between companies generally contributing to growth, and
companies with inclusive business models.
8.6.2 Accreditation system
In Philippines, an accreditation system, as show in figure 27 below, was piloted in three
priority sectors – agri-business, housing, and tourism. When developing the criteria of the
respective sector’s accreditation systems, the government sought input from the business
associations and private sector stakeholders. One of the key design principle that was used
in the design of the system was the accreditation criteria and weightage of components.
However, as impact and scale could be correlated to company’s size, the BoI has adjusted
the benchmarks for impact according to size. This is to prevent the penalisation of small
enterprises who have a good inclusive business model.
The accreditation system is scheduled to be formally introduced in early 2016. Further, it will
be institutionalised as the following:
 The Board of Investments IB accreditation evaluation uses a composite rating
tool
 It evaluates business models and not companies
 It uses sector specific criteria and benchmarks
 The rating is based on an ex-ante assessment; the preliminary rating is then
validated after 6-12 months through checking the social impact of the actual
investment
 Companies can apply for IB accreditation on a voluntary basis.
68
Figure 27: Inclusive Business Accreditation system piloted in the Philippines
Source: ADB internal documents
69
8.7
Literature list
WBCSD (2016), “Delivering on the Sustainable Development Goals: The inclusive business
approach”, http://www.wbcsdservers.org/web/wbcsdfiles/files/2016/03/WBCSD_Inclusive_Business_SDGs.pdf
IFC Issue briefs (unknown), “IFC and Inclusive Business Models”,
http://www.ifc.org/wps/wcm/connect/377ce0804cef73e491abd5f81ee631cc/IFC+Issue+Brief_AM12_Inclusive+Bu
siness.pdf?MOD=AJPERES
IFC (2012), “Policy Note on the Business Environment for Inclusive Business Models”,
http://www.g20challenge.com/wpcontent/uploads/2013/09/G20_Policy_Note_on_Inclusive_Business_Policies_G20_Summit_September_2013.pdf
Preqin (2015), “2015 Preqin Global Private Equity & Venture Capital Report”,
https://www.preqin.com/docs/reports/2015-Preqin-Global-Private-Equity-and-Venture-Capital-Report-SamplePages.pdf
Impact Base (2015), “ImpactBase Snapshot: An Analysis of 300+ Impact Investing Fund”,
https://thegiin.org/assets/documents/pub/ImpactBaseSnapshot.pdf
GIIN (2015), “Introducing the Impact Investing Benchmark”,
https://thegiin.org/assets/documents/pub/Introducing_the_Impact_Investing_Benchmark.pdf
J.P. Morgan, GIIN (2014), “Spotlight on the market2014”,
https://thegiin.org/assets/documents/pub/2014MarketSpotlight.PDF
Scott Morris and Madeleine Gleave (2015), “Realising the Power of Multilateralism in
Development Policy” http://www.cgdev.org/sites/default/files/whw-multilateralism.pdf
ADB (2013), “Developing the Business Case for investing in Inclusive Business in the
Mekong, A market brief”, http://api.ning.com/files/Y4MVF3b94yKThiq34uLOIS12i6KlVvwqiqLrDplxyWpKYXqe7o8CPTJc8oeJlYkeDabW5L-c8eEMPz6SfG*rRCLTNJFzGZk/ADBStudyMekong.pdf
ADB (2012), “Establishing an Inclusive Business Private Equity fund in Vietnam, A market
scoping study”, http://www.adb.org/sites/default/files/related/32728/ib-market-study-viet-nam.pdf
ADB (2013), “Developing the Business Case for investing in Inclusive Business in Indonesia,
A market scoping study”, http://www.adb.org/sites/default/files/related/32751/INO%20-%20IB.pdf
ADB (2013), “Inclusive Business study Philippines”,
http://www.adb.org/sites/default/files/related/32074/phi-2nd-ibf-business-study.pdf
ADB and IDB (2013), “Working Together in Pursuit of Inclusive Business: Sharing the Latin
American and Caribbean Experience with Asia and the Pacific”,
http://www.adb.org/publications/working-together-pursuit-inclusive-business-sharing-latinamerican-caribbean-experience
ADB (2014), “Midterm Review of Strategy 2020: Meeting the Challenges of Transforming
Asia and Pacific”, http://www.adb.org/documents/midterm-review-strategy-2020-meeting-challengestransforming-asia-and-pacific-r-paper
Lydia Domingo and Armin Bauer (2016), “Financing Inclusive Business, Background paper
for the 2nd Inclusive Business Forum for the Philippines”,
http://www.adb.org/sites/default/files/related/32070/phi-2nd-ibf-background-paper.pdf
DFID (2011), “The engine of development: The private sector and prosperity for poor
people”, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/67490/Private-sectorapproach-paper-May2011.pdf
Gender Equality, Bridging the Gap, ADB,
http://www.adb.org/sites/default/files/publication/29048/bridging-gap.pdf
ADB and Dalberg (2016), “Are Social Enterprises the Inclusive Businesses of tomorrow?”
<enter weblink here>
IFC (2015), “Inclusive Business at IFC - How IFC approaches and defines Inclusive
Business”
70
http://www.ifc.org/wps/wcm/connect/4e51da004b60933a8046d508bc54e20b/DefinitionReviewProcessOct2015.p
df?MOD=AJPERES
G20 Development Working Group (2015), “G20 Inclusive Business Framework”,
http://www.ifc.org/wps/wcm/connect/f0784d004a9b1f2ea5f0ed9c54e94b00/Attachment+G++G20+Inclusive+Business+Framework_Final.pdf?MOD=AJPERES